96th Congress ) HOUSE OF REPRESENTATIVES f Report
1st Session j ] No. 96-420

HEALTH PLANNING AND RESOURCES DEVELOPMENT
AMENDMENTS, 1979

September 5, 1979. — Ordered to be printed

Mr. Staggers, from the committee of conference,
submitted the following

CONFERENCE REPORT

[To accompany S. 544]

The committee of conference on the disagreeing votes of the two
Houses on the amendments of the House to the bill (S. 544) to amend
titles XV and XVI of the Public Health Service Act to revise and
extend the authorities and requirements under those titles for health
planning and resources development, having met, after full and free
conference, have agreed to recommend and do recommend to their re-
spective Houses as follows :

That the Senate recede from its disagreement to the amendment of
the House to the text of the bill and agree to the same with an amend-
ment as follows :

In lieu of the matter proposed to be inserted by the House amend-
ment insert the following :

short title; references to public health service act; and table

of contents

Section 1. (a) This Act may be cited as the "Health Planning and
Resources Development Amendments of 1979".

(b) Whenever in this Act (other than in subsections (j) and (k) of
section US and subsection (a) of section 128) an amendment or repeal
is expressed in terms of an amendment to, or repeal of, a section or
other provision, the reference shall be considered to be made to a sec-
tion or other provision of the Public Health Service Act.

TABLE OF CONTENTS

Sec,. 1. Short title; references to Public Health Service Act; and table of
contents.

TITLE I— REVISION OF HEALTH PLANNING AUTHORITY

Sec. 101. Revision and reporting on national guidelines for health planning.
Sec. 102. National health priorities; National Council on Health Planning and
Development.

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Sec. 108. The role of competition in the allocation of health services.

Sec. lOJf. Designation of health service areas.

Sec. 105. Designation of health systems agencies.

Sec. 106. Planning grants.

Sec. 107. Carryover of grant funds.

Sec. 10S. Membership requirements.

Sec. 109. Governing tody selection.

Sec. 110. Responsibilities of governing bodies.

Sec. 111. Meetings and records.

Sec. 112. Support and reimbursement for members of governing bodies.

Sec. 113. Conflicts of interest.

Sec. 114- Staff expertise.

Sec. 115. Health plan requirements.

Sec. 116. Criteria and procedures for reviews.

Sec. 117. Certificate of need programs.

Sec. 118. Appropriateness review.

Sec. 119. Review and approval of proposed uses of Federal funds.
See. 120. Coordination of health planning with rate review.

Sec. 121. Coordination within standard metropolitan statistical areas and with

other entities.
Sec. 122. Collection and publication of hospital charges.
Sec. 128. State health planning and development agencies.
Sec. 124. Statewide Health Coordinating Council composition.
Sec. 125. Centers for health planning.
Sec. 126. Definitions.
Sec. 127. Authorizations.
Sec. 128. Technical amendment.
Sec. 129. Effective date.

TITLE II— REVISION OF AUTHORITY FOR HEALTH RESOURCES

DEVELOPMENT

Sec. 201. Revision and extension of assistance.
Sec. 202. Conforming amendments.
Sec. 203. Technical amendments.
Sec. 204. Effective date.

TITLE III— PROGRAM TO ASSIST AND ENCOURAGE THE DISCONTIN-
UANCE OF UNNEEDED HOSPITAL SERVICES

Sec. 301. Authorization of program.
Sec. 302. Study.

TITLE I— REVISION OF HEALTH PLANNING A UTHORITY

REVISION AND REPORTING ON NATIONAL GUIDELINES FOR HEALTH PLANNING

Sec. 101. (a)(1)(A) Section 1501 is amended (i) by striking out
"and shall, as he deems appropriate, by regulation revise such guide-
lines" in subsection (a), and (it) by adding after subsection (c) the
following :

u(d) The Secretary shall, on an annual basis, review the standards
and goals included in the guidelines issued under subsection (a). In
conducting such a review, the Secretary shall review the health sys-
tems plans and annual implementation plans of health systems
agencies and State health plans. If the Secretary proposes to revise a
guideline issued under subsection (a), he shall make such revision by
regulations promulgated in accordance with section 553 of title 5,
United States Code.

"(e) (1) The Secretary may collect data to determine whether the
health care delivery systems meet or are changing to meet the goals
included in health systems plans under section 1513(b) (2) and State

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health plans under section 1524 and to determine the personnel, fa-
cilities, and other resources needed to meet such goals. The Secretary
shall prescribe (A) the manner in lohich such data shall be assembled
and reported to the Secretary by health systems agencies, State, health
planning and development agencies, and other entities, and (B) the
definitions which shall be used by such agencies and entities in assem-
bling and reporting such data.

"(2) The Secretary shall from the data collected under paragraph
(1) periodically make public a (A) statement of the relationship be-
txceen the goals contained in the health systems plans anal the State
health plans and the status of the supply, distribution, and organiza-
tion of health resources with respect to which such goals were estab-
lished, and (B) summary of changes (either through additions or
reductions) in resources needed to meet such goals.".

(B) The amendments made by subparagraph (A) do not authorize
the enactment of new budget authority before October 1, 1979.

(2) Subsection (b)(1) of section 1501 is amended by adding at the
end thereof the following : "Such standards shall reflect the unique
circumstances and needs of medically underserved populations in iso-
lated rural communities.".

(3) Subsection (c) of section 1501 is amended by striking out "In
issuing guidelines under subsection (a) the Secretary shall" and in-
serting in lieu thereof "At least 45 days before the initial publication
of a regulation proposing a guideline under subsection (a) or a revi-
sion under subsection (d) of such a guideline, the Secretary shall, with
respect to such proposed guideline or revision".

(b)(1) Section 1513(b) (1) is amended by adding after and below
subparagraph (F) the following :

"The agency shall also assemble and report to the Secretary such
data (including data on the personnel, facilities, and other resources
needed to meet the goals set forth in the agency' 's health system plan)
as the Secretary may require to carry out his responsibilities under
section 1501 (e). The Secretary may not require the assembling and re-
porting of data under this paragraph which is regularly collected by
any entity of the Department of Health, Education, and Welfare under
a provision of law other than this title.".

(2) Section 1522(b) (10) is amended by inserting after "require the
State agency ton the following: "(A) assemble and report to the Sec-
retary data (other than data which is regularly collected by any entity
of the Department of Health, Education, and Welfare under a provi-
sion of law other than this title) which the Secretary may require to
carry out his responsibilities under section 1501(e), including data on
the personnel, facilities, and other resources needed to meet the goals
set forth in the State health plan, and (B)

NATIONAL HEALTH PRIORITIES,' NATIONAL COUNCIL ON HEALTH PLANNING

AND DEVELOPMENT

Sec. 102. (a) (1) Section 1502 is amended by adding at the end the
following :

"(12) The identification and discontinuance of duplicative or
unneeded services and facilities.

"(13) The adoption of policies which will (A) contain the
rapidly rising costs of health care delivery, (B) insure more ap-

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propriate use of health care services, and (C) promote greater
efficiency in the health care delivery system.

"(14) The elimination of inappropriate placement in institu-
tions of persons toith mental health problems and the improvement
of the quality of care provided those with mental health problems
for whom institutional care is appropriate.

"(15) Assurance of access to community mental health centers
and other mental health care providers for needed mental health
services to emphasize the provision of outpatient as a preferable
alternative to inpatient mental health services.

"(16) The promotion of those health services which are pro-
vided in a manner cognizant of the emotional and psychological
components of the prevention and treatment of illness and the
maintenance of health".
(2) Section 1502(9) is amended by inserting before the period the
following: "and the development and use of cost saving technology".

(b) Section 1503(b) (1) is amended (1) by striking out "fifteen"
and inserting in lieu thereof "twenty" ; (2) by inserting "the Assistant
Secretary for Rural Development of the Department of Agriculture"
after "Defense," ; (3) by striking out "not less than five shall be per-
sons who are not providers of health services" and inserting in lieu
thereof "not less than eight members shall be persons who are not
providers of health care and those members shall include individuals
who represent urban and rural medically underserved populations" ;
and (4) by inserting "not less than one member shall represent hospi-
tals" after "Federal Government,".

THE ROLE OF COMPETITION IN THE ALLOCATION OF HEALTH SERVICES

Sec 103. (a) Section 1502(a) is amended by adding after para-
graph (16) (added by section 102 (a)) the following new paragraph :
"(17) The strengthening of competitive forces in the health
services industry wherever competition and consumer choice can
constructively serve, in accordance with subsection (b), to ad-
vance the purposes of quality assurance, cost effectiveness, and.
access".

(b) Section 1502 is amended (1) by inserting "(a)" after "1502.",
and (2) by adding at the end the following:

"(b)(1) The Congress finds that the effect of competition on deci-
sions of providers respecting the supply of health services and facili-
ties is diminished. The primary source of the lessening of such effect
is the prevailing methods of paying for health services by public and
private health insurers, particularly for inpatient health services and
other institutional health services. As a result, there is duplication and
excess supply of certain health services and facilities, particularly in
the case of inpatient health services.

"(2) For health services, such as inpatient health services and other
institutional health services, for which competition does not or will
not appropriately allocate supply consistent with health systems plans
and State health plans, health systems agencies and State health plan-
ning and development agencies should in the exercise of their func-
tions under this title take actions (where appropriate to advance the
purposes of quality assurance, cost effectiveness* and access and the
other purposes of this title) to allocate the supply of such services.

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"(3) For the health services for which competition appropriately
allocates supply consistent with health systems plans and State health
plans, health systems agencies and State health planning and develop-
ment agencies should in the performance of their functions under
this title give priority (lohere appropriate to advance the purposes of
quality assurance, cost effectiveness, and access) to actions which
icould strengthen the effect of competition on the supply of such
services.".

(c) Section 1513(a) is amended (1) by striking out "and" at the
end of paragraph (3) , (2) by inserting "and" at the end of paragraph
(4) , and (3) by adding after paragraph (4) the following :

"(5) preserving and improving, in accordance with section
1502(b), competition in the health service area".

(d) Section 1532(c) is amended by adding at the end the following :
"(11) In accordance with section 1502(b), the factors which

affect the effect of competition on the supply of the health services
being revieived.

"(12) Improvements or innovations in the financing and de-
livery of health services which foster competition, in accordance
with section 1502(b), and serve to promote quality assurance and
cost effectiveness".

DESIGNATION OF HEALTH SERVICE AREAS

Sec. 10b. (a) (1) Section 1511(b) (4) is amended to read as follows:
"(4) The Secretary shall review on his own initiative or at the
request of any Governor or designated health systems agency the
appropriateness of the boundaries of the health service areas estab-
lished under paragraph (3) and, if he determines that —

"(A) the boundaries for a health service area no longer meet
the requirements of subsection (a), or

"(B) the boundaries for a proposed revised health service area
meet the requirements of subsection (a) in a significantly more ap-
propriate manner m terms of the efficiency and effectiveness of
health planning efforts,
he shall revise the boundaries in accordance with the procedures pre-
scribed by paragraph (3)(B)(ii). If the Secretary acts on his
own initiative to revise the boundaries of any health service
area, he shall consult with the Governor of the State or States which
ivould be affected by the revision, the chief executive officer or agency
of the political subdivisio-ns within such State or States, and the des-
ignated health systems agency or agencies and the established State-
wide Health Coordinating Council or Councils that woidd be affected
by the revision. A Governor may request a revision of the boundaries
of a health service area only after consultation with the Governor of
any other State or States thai would be affected by the revision* the
chief executive officer or agency of the political subdivisions ivithin
such State or States, and the designated health systems agencies and
the established Statewide Health Coordinating Council or Councils
that would be affected by the revision and shall include in such request
the comments concerning the proposed revision made by such indi-
viduals and entities. A designated health systems agency may request
a revision of the boundaries of its health service area only after con-

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sulfation with the Governor of the State or States that toould be af-
fected by the revision, the chief executive officer or agency of the politi-
cal subdivisions within such State or States, the Stateivide Health
Coordinating Council of such State or States, and the health systems
agencies that ivould be affected by the revision and shall include in
such request the comments concerning the proposed revision made by
such individuals and entities. No proposed revision of the boundaries
of a health service area shall comprise an entire State toithout the
prior consent of the Governor of such State. In addition, for each
proposed revision of the boundaries of a health service area, the Secre-
tary shall give notice and am, opportunity for a hearing to all interested
persons and make a written determination of his findings and
decision.".

(2) Not later than one year after the date of the enactment of this
Act the Secretary shall by regulation prescribe criteria for the revision
of health service area boundaries under section 1511(b)(4) of the
Public Health Service Act (as amended by paragraph (i)).

(b) Section 1511(c) is repealed.

(c) (1) Section 1536(a) is amended by inserting "the Common-
wealth of Puerto Rico," before uthe Virgin Islands".

(2) Section 1531(1) is amended by striking out uand the Common-
ivealth of Puerto Rico".

DESIGNATION OF HEALTH SYSTEMS AGENCIES

Sec. 105. (a) Section 1515(b) (If) is amended by striking out the
last sentence and inserting in lieu thereof : uIn considering such ap-
plications, the Secretary shall give priority to any application which
has been recommended by a Governor or a Statewide Health Coordi-
nating Council for approval. When the Secretary enters into an agree-
ment with an entity under paragraph (1), the Secretary shall notify
the Governor of the State in which such entity is located of suc\h\
agreement" .

(b) The last sentence of section 1515(c) (2) is amended to read as
follows: u In considering such applications, the Secretary shall give
priority to any application which has been recommended by a Gover-
nor or a Stateivide Health Coordinating Council for approval".

(c) Section 1515(c) is amended by adding after paragraph (3) the
following :

" (If) Before renewing an agreement with a. health systems agency
under this subsection, the Secretary shall provide the State health
planning and development agency of the State in which the health sys-
tems agency is located an opportunity to comment on the performance
of such agency and to provide a recommendation on whether such
agreement should be renewed and, whether its reneioal should be made
subject to conditions as authorized by paragraph (3).

"(5) If the Secretary enters into an agreement under this subsection
with an entity or renews such an agreement, the Secretary shall notify
the Governor of the State in ichiah such entity is located of the agree-
ment, its renewal, and, if any conditions have been imposed under
paragraph (3) , such conditions.".

(d) (1)(A) Paragraphs (1) and (3) of section 1515(c) are each
amended by striking out u twelve months" and inserting in lieu thereof
"thirty -six months".

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(B) The amendments made by subparagraph (A) shall take effect
with respect to designation agreements entered into under section
1515(c) of the Public Health Service Act after the date of enactment
of this Act.

(2) Section 1515(c) (1) is amended —

(A) by inserting "(A)" after "(c) (2)",

(B) by redesignating subparagraphs (A) and (B) as clauses
(i) and (ii) .respectively,

(C) by amending clause (ii) (as so redesignated) to read as
follows :

"(ii) by the Secretary if the Secretary determines, in ac-
cordance with subparagraph (2?), that the entity is not com-
plying with the provisions of such agreement", and

(D) by adding at the end the following:

"(B) Before the Secretary may terminate, under subpara-
graph (A) (ii), an agreement with an entity for designation
as the health systems agency for a health service area, the
Secretary ' shall—

"(i) consult with the Governor and the Statewide
Health Coordinating Council of each State in ichich is
located the health service area respecting tlie proposed
termination,

" (ii) give the entity notice of the intention to terminate
the agreement and in the notice speci fy with particularity

(I) the basis for the determination of the Secretary that
the entity is not in compliance with the agreement, and

(II) the actions that the entity should take to come into
compliance with the agreement, and

"(Hi) provide the entity with a reasonable opportun-
ity for a hearing, before an officer or employee of the De-
partment of Health, Education, and Welfare designated
for such purpose, on the matter specified in the notice.
The Secretary may not terminate such an agreement before consult-
ing with the National Council on Health Planning and Development
respecting the proposed termination. Before the Secretary may permit
the term of an agreement to expire without reneicing the agreement,
the Secretary shall make the consultations prescribed by clause (i)
and the preceding sentence, give the entity with which the agreement
teas made notice of the intention not to renew the agreement and the
reasons for not renewing the agreement, and provide, as prescribed
by clause (Hi), the entity an opportunity for a hearing on the matter
specified in the notice." \

(e) Section 1515(c) (as amended by subsection (d)) is amended
by adding after clause (ii) of paragraph (1) (A) the following : "A
designation agreement under this subsection may be terminated by the
Secretary before the expiration of its term if the health service area
with respect to which the agreement was entered into is revised under
section 1511(b) (4) and the Secretary determines, after consultation
with the Governor and Statewide Health Coordinating Council of
each State in which the health service area (as revised) is located,
that the health systems agency designated under such agreement can-
not effectively carry out the agreement for the area (as revised). In

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terminating an agreement under the preceding sentence, the Secre-
tary may provide that the termination not take effect before an agree-
ment for the designation of a new agency takes effect and shall provide
the agency designated under the agreement to be terminated an op-
portunity to terminate its affairs in a satisfactory manner".

(/) Section 151 4< is amended (1) by striking out "may" and insert-
ing in lieu thereof "shall", and (2) by striking out "(including en-
tities" through "section 301f) ".

(g) Section 1515(d) is amended (1) by inserting "agreement" after
"If a designation", and (2) by inserting "or is not renewed" after
"prescribed for its expiration".

(h) Section 1515(c) (3) is amended (1) by inserting "(A)" after
"(3)"; (2) by inserting "during the period of the agreement to be
renewed" after "section 1513" ; and (3) by adding at the end thereof
the following new subparagraph :

" (B) If upon a review under section 1535 of the agency's operation
and performance of its functions, the Secretary determines that it has
not fulfilled , in a satisfactory manner, the functions of a health sys-
tems agency prescribed by section 1513 during the period of the agree-
ment to be reneioed or does not continue to meet the requirements of
section 1512(b), he may terminate such agreement or return such
agency to a conditionally designated status under subsection (b) for a
period not to exceed twelve months. At the end of such period, the
Secretary shall either terminate the agreement with such agency or
enter into an agreement with such agency under paragraph (1). The
Secretary may not take the action authorized by the first sentence of
this subparagraph unless the Secretary has —

"(i) provided the agency with notice of his intent to re-
turn it to a conditional status or terminate the agreement
with the agency and included in that notice specification of
any functions which the Secretary has determined the agency
did not satisfactorily fulfill and of any requirements which
the Secretary has determined the agency has not met;

"(ii) provided the agency ivith a reasonable opportunity
for a hearing, before an officer or employee of the Depart-
ment of Health, Education, and Welfare designated for such
purpose, on the action proposed to be taken by the Secretary ;
and

"(Hi) in the case of a proposed termination of an agree-
ment, consulted with the National Council on Health Plan-
ning and Development respecting the termination".

PLANNING GRANTS

Sec. IOC), (a) Section 1516 is amended by redesignating subsection
(c) as subsection (d) and by striking out subsection (b) and inserting
in lieu thereof the following :

"(b) The amount of any grant under sub section (a) to a health
systems agency designated under section 1515(b) shall be determined
by the Secretary.

"(c) (1) Except as provided in paragraph (2) , the amount of a grant
under subsection (a) to a health systems agency designated under

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section 1515(c) shall be the greater of the amount determined under
subparagraph (A), (B),or (C) as follows :

"(A) The amount of a grant to a health systems agency shall
be the lesser of —

"(i) the product of $0.60 and the population of the health
service area for which the agency is designated, or
"(ii) $3,750,000.
"(B) (i) If the application of the health systems agency for such
grant states that the agency, in its latest fiscal year ending before
the period in ivhich such grant toill be available for obligation,
collected non-Federal funds meeting the requirements of clause
(ii) for the purposes for which such grant may be made, the
amount of such grant shall be the sum of —

" (/) the amount determined under subparagraph (A )
or (0), whichever is applicable, and

"(II) the lesser of the amount of such non-Federal
funds or $200,000 or the product of $0.25 and the popula-
tion of the health service area for which the agency is
designated, whichever is greater.
" (ii) The non-Federal funds which an agency may use for the
purpose of obtaining a grant under subsection (a) which is com-
puted on the basis of the formula prescribed by clause (i) shall
be funds ivhich are not paid to the agency for the performance of
particular services by it and ivhich are otherioise contributed to
the agency without conditions as to their use other than the con-
dition that the funds shall be used for the purposes for which a
grant made under this section may be used.

"(C) The amount of a grant to a health systems agency may
not be less than —

"(i) in the case of a grant made in the fiscal year ending
September 30, 1979, $175,000 and, to the extent appropria-
tions are specifically made after October 1, 1979, to provide
the additional amount authorized by this clause, an amount
ivhich bears the same ratio to $50,000 as the number of days
beginning in the period beginning on October 1, 1979, and
ending on the date of the period for tohich the grant was
made bears to 365,

" (ii) $225,000 in the case of a grant made in the fiscal year
ending September 30, 1980,

" (Hi) $245,000 in the case of a grant made in the fiscal year
ending Sentember 30. 1981, and

"(iv) $260,000 in the case of a, grant made in any succeed-
ing fiscal year.

" (2) If the Secretary determines, after review of the budget of
a health systems agency and after consultation urith the State
henlth plannina and, development agency of the State in which
such agency is located, that the amount of a grant which is to be
made to the agency in accordance with paragraph (1) is in excess
of the amount needed by the agency to adequately perform its
functions under its desiqnation agreement, the amount of the
grant to the agency shnll be such amount as the Secretary deter-
mines the agency needs for the performance of such functions".

50-674 0-79-2

10

(b) Subsection (d) (as so redesignated) is amended by striking
out paragraph (2) and inserting in lieu thereof the following :

"(2) Of the amount appropriated under paragraph (1) for
any fiscal year, the Secretary may use not more than 5 per centum
of such amount to increase the amount of grants in such fiscal
year to health systems agencies under subsection (a) to assist the
agencies in meeting extraordinary expenses (including ertraordi-
nary expenses resulting from an agency'1 s health service area being
located in more than one State or from an agency serving a large
rural or urban medically underserved population or a geograph-
ically large health service area) ivhich would not be covered under
the amount of a grant that would be available to an agency under
subsection (c) and in improving their performance as a result of
the development and implementtion of innovative health planning
techniques.".

"(-5) Notwithstanding subsection (c)(1), if the total of the
amounts appropriated under paragraph (1) for any fiscal year
(reduced by the amount to be retained by the Secretary for use
under paragraph (2)) is less than the amount required to make
grants to each health system agency designated under section
1515(c) in the amount prescribed for such agency by subpara-
graph (A), (B), or (C) of subsection (c) (1), the Secretary shall
make a pro rata reduction in the amount of the grant to each
such agency, but, to the extent of available appropriations, no
such agency shall receive a grant in an amount less than the
amount prescribed by such subparagraph (C) for such fiscal
year.".

(c) The second sentence of section 1516(a) is amended by
inserting "(including submission of the health systems agency 's
budget) " after "such conditions".

CARRYOVER OF GRANT FUNDS

Sec. 107. (a) Section 1513(c) (3) is amended by striking out the
period at the end of the fourth sentence and inserting in lieu thereof
the following : "unless another grant or contract is made or entered
into, in which case the funds under the first grant or contract shall
remain available for the period of the second grant or contract. Funds
from a first grant or contract which remain available for obligation
in the period of a second grant or contract shall not be considered in
determining the amount of the second grant or contract".

(b) (1) The second sentence of section 1516(a) is amended by strik-
ing out and shall be available for obligation" and all that follows
in such sentence and inserting in lieu thereof a period.

(2) Such section is amended by inserting after the second^ sentence
the following: "Funds under a grant which remain available for
obligation at the end of the fiscal year in ivhich the grant has been
made shall remain available for obligation in the succeeding fiscal
year, except that (1) no funds under any grant to an agency [ may be
'obligated in any period in which a designation agreement is not in
effect for such 'agency, and (2) notwithstanding clause (1), a grant
made to a conditionally designated entity with ivhich the Secretary
will not enter into a designation agreement under section 1515(c)
shall be available for obligation for such additional period as the

11

Secretary determines such entity will require to satisfactorily termi-
nate its activities under the agreement for its conditional designation.".

(c) The second sentence of section 1525 (a) is amended to read as
follows: "Funds under a grant tuhich remain available for obligation
at the end of the fiscal year in which the grant has been made shall
remain available for obligation in the succeeding fiscal year, but no
funds under any grant to a State Agency may be obligated in any
period in which a designation agreement is not in effect for such
State Agency,",

(d) Section 1526(c) is amended (1) by striking out "(1) such a
grant" and all that follows through "(#)'", and (2) by inserting at
the end^ the^ following : "Funds under a grant which remain available
for obligation at the end of the fiscal year in which the grant has been
made shall remain available for obligation in the succeeding fiscal
year, but no funds under any grant to a State Agency may be obligated
in any period in which a designation agreement is not in effect for
such State Agency.",

MEMBERSHIP REQUIREMENTS

Sec. 108. (a) (1) Clause (i) of section 1512(b) (3) (C) is amended
(A) bv inserting "(I)" after "shall be", and (B) by striking out all
after "providers of health care" and inserting in lieu thereof ", and
(II) broadly representative of the health service area and shall in-
clude individuals representing the principal social, economic, linguistic,
handicapped, and racial populations and geographic areas of the health
service area and major purchasers of health care (including labor
organizations) in the area".

(2) The first sentence of section 1512(b) (3) (0) (ii) is amended (A)
by striking out "residents of" and inserting in lieu thereof "residents
of, or have their principal place of business in ", (B) in subclause (I),
by inserting "podiatrists, physician assistants," after "optometrists",
(C) by inserting "rehabilitation facilities," after "long-term care fa-
cilities," in subclause (//), (D) by striking out "substance abuse" in
subclause (II) and inserting in lieu thereof "alcohol and drug abuse",
(E) by striking out "and" at the end of subclause (IV), and (F) by
inserting before the period a comma and the following : "and (VI)
other providers of health care".

(3) The second sentence of section 1512(b) (3) (0) (ii) is amended
(A) by striking out "one-third" and inserting in lieu thereof "one-
half", and (B) by inserting before the period at the end the follow-
ing: "and of such direct providers of health care, at least one shall be
a person engaged in the administration of a hospital".

(b)(1) Section 1512(b) (3) (C) (Hi) (I) is amended by striking out
"and other representatives of governmental authorities" and inserting
in lieu thereof "and other representatives of units of general purpose
local government".

(2) Subclause (II) of such section is amended (A) by striking out
"is equal" and inserting in lieu thereof "is at least equal", and (B) by
striking out "and" at the end.

(3) Such section is amended by striking out subclause (III) and
inserting in lieu thereof the following :

"(III) include (through consumer and provider members) indi-
viduals who are knowledgeable about mental health services,

12

U(IV) if the health systems agency serves an area in which there is
located one or more hospitals or other health care facilities of the Vet-
erans'* Administration, include, as a nonvoting, ex officio member, an
individual whom the Chief Medical Director of the 'Veterans'' Admin-
istration shall have designated for such purpose, and

U(V) if the agency serves an area in which there is located one or
more health maintenance organizations, include at least one member
who is representative of such organizations.".

(c) Section 1512(b) (S) (C) is amended by inserting after and below
clause (iv) the following :

"For purposes of clause {Hi) (I), to be considered a representative
of a unit of general purpose local government, an individual must be
appointed by such unit or a combination thereof, and the State gov-
ernment of a State which is comprised of a single health service area
shall be deemed to be a unit of general purpose local government. A
member of a governing body appointed pursuant to clause {Hi) {IV)
shall not be considered in determining the number of members of the
governing body for purposes of the numerical limit prescribed by
subparagraph (A).".

{d) {!) Section 1512 {b) (3) (C) (i) is amended {A) by striking out
"(nor within the twelve months preceding appointment been)", and
(B) by inserting "{including labor organizations and business cor-
porations) " after "major purchasers of health care".
{2) Section 1531 {3) is amended to read as follows :
"(3) The term 'provider of health care"* means an individual —
" {A ) ivho is a direct provider of health care {including a physi-
cian, dentist, nurse, podiatrist, optometrist, physician assistant,
or ancillary personnel employed under the supervision of a physi-
cian) in that the individual's primary current activity is the
provision of health care to individuals or the administration of
facilities or institutions {including hospitals, long-term care facili-
ties, rehabilitation facilities, alcohol and drug abuse treatment
facilities, outpatient facilities, and health maintenance organiza-
tions) in which such care is provided and, when required by State
law, the individual has received professional training in the pro-
vision of such care or in such administration and is licensed or
certified for such provision or administration;

U(B) who holds a fiduciary position with, or has a fiduciary in-
terest in, any entity described in clause (ii) or {iv) of subpara-
graph (C) other than an entity described in such clause which
is also an entity described in section 501 {c) {3) of the Internal
Revenue Code of 195 '4- and which does not have as its primary
purpose the delivery of health care, the conduct of research, the
conduct of instruction for health professionals, or the produc-
tion of drugs or articles described in clause {Hi) of subparagraph

"(C) who receives (either directly or through the individual* s
spouse) more than one-fifth of his gross annual income from any
one or combination of —

< " (i) fees or other compensation for research into or instruc-
tion in the provision of health care,

u(ii) entities engaged in the provision of health care or
in research or instruction in the provision of health care,

13

"(Hi) producing or supplying drugs or other articles for
individuals or entities for use in the provision of or in re-
search into or instruction in the provision of health care, or

"(iv) entities engaged in producing drugs or such other
articles;

" (D) who is the member of the immediate family of an individ-
ual described in subparagraph (A) , (B) , or (C) ; or

" (E) who is engaged in issuing any policy or contract of indi-
vidual or group health insurance or hospital or medical service
benefits.

An individual shall not be considered' a provider of health care solely
because the individual is the member of the governing board of an
entity described in clause (ii) or (iv) of subparagraph (C).".

(e) Section 1512(b) (3) (G) (iv) is amended (1) by striking out
"of its members", and (2) by adding before the period at the end a
comma and the following "except that appointments shall be made to
such subcommittees and groups in such a manner that a majority of
their members shall be consumers of health care".

GOVERNING BODY SELECTION

Sec. 109. Section 1512(b) (3) is amended by adding after subpara-
graph (C) the following new subparagraph:

"(D) Selection. — Each health systems agency shall establish
a process for the selection of the members of its governing body
which process is designed to assure that (i) such members are
selected in accordance with the requirements of subparagraph
(0), (ii) there is the opportunity for broad participation in such
process by the residents of the health service area of the agency,
and (Hi) the participation of such residents will be encouraged
and facilitated. Such process shall prohibit the selection of more
than one-half of the members of such body by members of such
body. Each agency shall make public such process and report it
to the Secretary. The requirements of this subparagraph shall
apply with respect to the selection of members of a subarea ad-
visory council if the council is authorized to select or selects one
or more members of the governing body of a health systems
agency".

responsibilities of governing bodies

Sec. 110. (a) Section 1512(b) (3) (B) (i) is amended to read as
follows :

u(i) shall be responsible for —

"(/) the internal affairs of the health systems agency, in-
cluding matters relating to the staff of the agency and the
agency's budget, except that the governing body for health
planning of an agency which is a public regional planning
body or unit of general local government shall not be respon-
sible for the establishment of personnel rules and practices
for the staff of the agency or for the agency's budget unless
authorized by the planning body or unit of government, and

14

" (//) procedures and criteria developed and published pur-
suant to section 1532 and applicable to its functions under
subsections (e), (f),and (g) of section 1513 ;".

(b) Section 1512 (b) (3) {A) is amended (1) by striking out "have
a governing body for health planning, which is established in accord-
ance toith subparagraph (0)," and inserting in lieu thereof " appoint
a governing body for health planning in accordance tvith subpara-
graph (O)", (2) by striking out "which has exclusive" and inserting
in lieu thereof "which shall have exclusive", and (3) by striking out
"not more than twenty-five members" and inserting in lieu thereof
"not less than ten members and not more than thirty members" .

(c) Section 1512(b) (3) (B) (w) is amended by striking out "(g),
and (h)" and inserting in lieu thereof "and (g)".

(d) (1) Paragraph (4) of section 1512(b) is amended to read as
follows :

"(4) Liability. —

"(A) In general. — Except as provided in subparagraph (B) —
"(i) a health systems agency shall not, by reason of the
performance of any duty, function, or activity, required of,
or authorized to be undertaken by, the agency, be liable for
the payment of damages under any law of the United States
or any State (or political subdivision thereof) if the member
of the governing body of the agency or employee of the
agency who acted on behalf of the agency in the performance
of such duty, function, or activity acted within the scope of
his duty, function, or activity as such a member or employee,
exercised due care, and acted without malice toward any
person affected by it; and

"(ii) no individual member of the governing body of a
health systems agency or employee of a health systems
agency shall, by reason of his performance on behalf
of the agency of any duty, function, or activity required of,
or authorized to be undertaken by, the agency, be liable
for the payment of damages under any law of the United
States or any State (or political subdivision of a State) if
he believed he was acting within the scope of his duty,
function, or activity as such a member or employee, and,
with respect to such performance, acted without gross negli-
gence or malice toward any person affected by it.
"(B) Exception. — Subparagraph (A) does not apply with re-
spect to civil actions for bodily injury to individuals or physical
damages to property brought against a health systems agency or
any member of the governing body of or employee of such an
agency.".

{2) Section 152)+ is amended by adding at the end thereof the follow-
ing new subsection :

" (d) No individual who as a member or employee of a SHOO shall,
by reason of his performance of any duty, function, or activity re-
quired of, or authorized to be undertaken by, the SHOO, be liable for
payment of damages under any law of the United States or any State
(or political subdivision of a State) if he believed he was acting within
the scope of his duty, function, or activity as such a member or em-
ployee, and acted, with respect to that performance, without gross
negligence or malice toward any person affected by it.".

15

(e) (1) The first sentence of section 1512(a) (3) (A) is amended by
striking out "to perform for the agency-' and inserting in lieu thereof
"to perform".

(2) (A) Section 1512(b) (3) (B) (ii) is amended by inserting before
the semicolon the folio icing: "and in the case of a health systems
agency which is a public regional planning body or unit of general local
government, the planning body or unit of government shall be given,
in accordance with sections 1513(b) (2) and 1513(b) (3) a reasonable
opportunity to comment on the health systems plan and annual imple-
mentation plan proposed by the governing body and to propose addi-
tions to and other revisions in it".

(B) The amendment made by subparagraph (A) shall not apply
with respect to a. health systems agency for which a designation- under
section 1515 of the Public Health Service Act was in effect on Janu-
ary 1. 1979, and which is a unit of general local government.

(3) Clauses (Hi) and (iv) of section 1512(b) (3) (B) are each
amended by striking out "approval" and inserting in lieu thereof "ap-
proval or disapproval".

(If) Section 1513(b) (2) is amended by adding at the end the follow-
ing: "If the health systems agency is a public regional planning body
or unit of general local government, the planning body or unit of
government shall be given a reasonable opportunity to comment
on the proposed HSP and to propose additions to any other re-
visions in it. Any such proposed additicms or other revisions not in-
cluded in the HSP established by the agency shall be appended to the
HSP. If the goals contained in the HSP are not consistent with guide-
lines issued by the Secretary under section 1501. it shall provide the
State health planning and development agency and the Secretary with
a detailed statement of the reasons for the inconsistency between such
goals and guidelines. When making such HSP available to a State-
wide Health Coordinating Council under section 1524(c) (2) (A), the
agency shall also report such statement to such Council".

(f) Section 1513(a) is amended by adding after the fii*st sentence
the following : "None of the funds authorized to be appropriated under
this title may be used by a health systems agency directly to pay any
individual to influence the issuance, amendment, or revocation, of any
Executive order or regulation by any Federal. State, or local chief ex-
ecutive officer or agency or to influence the passage, amendment or de-
feat of any legislation by the. Congress or by any State or local
legislative body. The preceding sentence does not apply with respect
to compensation paid by a health systems agency to an employee of the
agency unless the primary responsibility of the employee for the agency
is to influence such governmental action ".

IIFFTIXG-S AXD RECORDS

Sec 111. (rt) Section 1512(b) (3) (B) (viii) is amended by striking
out "conduct its business meetings in public" and inserting in lieu
thereof "hold in public meetings to conduct the business of the agency
(other than any part of a meetng in which it is likely, as determined by
the governing body, that information respecting the performance or
remuneration of an employee of the aqency will be disclosed and such
a, disclosure icould constitute a clearly unwarranted invasion of per-

16

sonal privacy of the employee or that information relating to the
agency' s participation in a judicial proceeding will he disclosed) and
(2) by striking out "its records and data" and inserting in lieu thereof
"records and data of the agency ( other than records or data respecting
the performance or remuneration of an employee the disclosure of
which would constitute a clearly unwarranted invasion of the personal
privacy of the employee and records or data of the agency relating
to its participation in a judicial proceeding) ".

(b) (1) Section 1512(b) (6) (A) is amended by inserting after usuch
information" the following: " (other than information respecting the
performance or remuneration of an employee of the agency the dis-
closure of which would constitute a clearly unwarranted invasion of
the personal privacy of the employee or information relating the
agency' s participation in a judicial proceeding) ".

(2) Section 1512(b)(6) is amended by redesignating subpara-
graphs (A), (B), and (C) as subparagraphs (B), ((7), and (D) and
by adding before subparagraph (B) (as so redesignated) the
folloioing :

U(A) provide that any executive committee of the agency and
any entity appointed by the governing body or executive com-
mittee of the agency shall (i) hold in public meetings to conduct
the business of the committee or entity (other than any part of a
meeting in which it is likely, as determined by the executive com-
mittee or entity, that information respecting the performance or
remuneration of an employee of the agency toill be disclosed and
such disclosure would constitute a clearly unwarranted invasion
of personal privacy of the employee or that information relating
the agency's participation in a judicial proceeding will be dis-
closed), and (ii) give adequate notice of its meetings to those
persons who have requested such notice;".

(c) Section 1522(b)(6) is amended (1) by striking out " conduct
its business meetings in public" and inserting in lieu thereof "hold in
public meetings to conduct the business of the State Agency (other
than any part of a meeting m which it is likely, as determined by the
State Agency, that information respecting the performance or remu-
neration of an employee of the agency will be disclosed and such a
disclosure would constitute a clearly unwarranted invasion of per-
sonal privacy of the employee or that information relating to the
agency- s participation in a judicial proceeding will be disclosed)",
and (2) by striking out "its records and data" and inserting in lieu
thereof "records and data of the agency (other than records or data
respecting the performance or remuneration of an employee the dis-
closure of which would constitute a clearly umvarranted invasion of
the personal privacy of the employee and records or data of the agency
relating to its participation in a judicial proceeding) ".

SUPPORT AND REIMBURSEMENT FOR MEMBERS OF GOVERNING BODIES

Sec. 112. (a) Section 1512(b) (3) is amended by adding after sub-
paragraph (D) (added by section 109 of this Act) the following new
subparagraph :

"(E) Support. — Each health systems agency shall have an
identifiable program of providing assistance to the members of

17

its governing body, executive committee (if any) , and any entity
appointed by the governing body or executive committee in mak-
ing decisions for the agency, and shall include in such program
means to determine the support needs of the members and to
provide for meeting those needs (including the provision of train-
ing and continuing education) .".

(b) Section 1512(b) (3) (B)(vi) is amended (1) by striking out
"reimburse" and inserting in lieu thereof "reimburse (or when appro-
priate make advances to) ", and (2) by inserting "and performing any
other duties and functions of the health systems agency" after "gov-
erning body".

(c) Section 1512(b) (2) (A) is amended by adding at the end the
following: "At least one member of the staff shall be designated to
have the responsibility of providing the members of the governing
body of an agency (particularly the consumer members) with such
information and technical assistance as they may require to effectively
perform their functions".

CONFLICTS OF INTEREST

Sec. 113. (a) Section 1512(b) (3) is amended by adding after sub-
paragraph (E) (added by section 112 of this Act) the following new
subparagraph :

"(F) Conflicts of interest. — No member of a governing body,
executive committee, or any entity appointed by a governing body,
or executive committee may, in the exercise of any function of the
agency described in subsection (e), (/), or (g) of section 1513,
vote on any matter before the governing body, executive commit-
tee, or any such entity respecting any individual or entity icith
which such member has (or, within the twelve months preceding
the vote, had) any substantial ownership, employment, medical
staff, fiduciary, contractual, creditor, or consultative relationship.
A governing body, executive committee, and any entity appointed
by a governing body or executive committee shall require each
of its members who has or has had such a relationship icith an
individual or entity involved in any matter before the governing
body, committee, or entity to make a written disclosure of such
relationship before any action is taken by the body, committee,
or entity with respect to such matter in the exercise of any func-
tion of the agency described in section 1513 and to make such
relationship public in any meeting in which such action is to be
taken".

(b) Section 1524 is amended by adding at the end the following
new subsection:

" (d) No member of any SHOO may, in the exercise of any function
of the SHOO described in subsection (c)(6), vote on any matter
before the SHOO respecting any individual or entity icith tchich svch
member has (or, within the twelve months preceding the vote, had)
any substantial ownership, employment, medical staff, fiduciary, con-
tractual, creditor, or consultative relationship. Each SHOO shall
require each of its members who has or has had such a relationship
with an individual or entity involved in any matter before the SHOO
to make a written disclosure of such relationship before any action

18

is taken by the SHCC with respect to such matter in the exercise of
any function under subsection (c) and to make such relationship
public in any meeting in which such action is to be taken.".

STAFF EXPERTISE

Sec. 11%,. Section 1512(b) (2) (A) is amended (1) by striking out
"health resources'''' in , the first sentence and inserting in lieu thereof
"health (including mental health) resources", (2) by striking out
"and" after "health planning" in such sentence, (3) by inserting
before the period in such sentence a comma and the following : u(v)
financial and economic analysis, and (vi) prevention of disease and
other public health matters", and (4) by striking out "health re-
sources" in the second sentence and inserting in lieu thereof "health
(including mental health) resources".

HEALTH PLAN REQUIREMENTS

Sec. 115. (a) Section 1524(c) (1) is amended by striking out "Re-
view" and inserting in lieu thereof "Establish (in consultation with the
health systems agencies in the State and the State Agency) a uniform
format for HSP^s and review".

(b) (1) Section 1513(b) (2) (A) is amended by inserting " (primarily
with regard to health care equipment and to health services provided
by health care institutions, health care facilities, and other providers
of health care and to other health resources) " after "healthful environ-
ment".

(2) Section 1513(b) (2) is amended (A) by striking out "establish"
in the first sentence and inserting in lieu thereof "establish (in accord-
ance loith the format established pursuant to section 1524(c) (1) ) " and
(B) by inserting after the first sentence the following : "The HSP of
the agency shall include goals for the delivery of mental health serv-
ices in its health service area which goals shall be developed under a
procedure under ivhich persons (acting as an advisory group or sub-
committee appointed by the agency or, if the agency requests and is
authorized by the Secretary to use an existing group, acting as part of
such a group) knowledgeable about such services (including services
for alcohol and drug abuse) will be consulted with respect to such
goals".

(3) Section 1522(b) (7) is amended (A) by striking out "and" at
the end of clause (A), and (B) by inserting before the period the fol-
lowing: ", and (C) provide for consultation and coordination (in ac-
cordance icith regulations of the Secretary) betiveen the State Agency,
the Statewide Health Coordinating Council, the State mental health
authority, and other agencies of the State government designated by
the Governor".

(c) (1) (A) Section 1523(a) (1) is amended by inserting " (A ) " after
u(l)" and by inserting before the period a comma and the following:
"and (B) determine the statewide health needs of the State after pro-
viding reasonable opportunity for the submission of written recom-
mendations respecting such needs by the State health authority, the
State mental health authority, and other agencies of the State govern-
ment, designated by the Governor for the purpose of making such rec-

19

ommendations, and after consulting with the Statewide Health
Coordinating Council".

(B) Section 1523(a) (2) is amended (i) by striking out "statewide
health needs'''1 and inserting in lieu thereof "statewide health needs de-
termined under paragraph (1) (5)", and (ii) by inserting after the
■first sentence the follotoing : "In carrying out its functions under this
paragraph, the State Agency shall refer the HSP's to the State health
authority, the State mental health authority, and other agencies of the
State government (designated by the Governor to make the review pre-
scribed by this sentence) to review the goals and related resource re-
quirements of the HSP^s and to make written recommendations to the
State Agency respecting such goals and requirements".

(C) Subsection (a) of section 1523 is amended by adding after and
below the last paragraph the following: "If in determining the state-
wide health needs under paragraph (1) (B) or in preparing or revis-
ing a preliminary State health plan under paragraph (2) the State
Agency does not take an action proposed in a recommendation sub-
mitted under the applicable paragraph, the State Agency shall when
publishing such needs or health plan make available to the public a
written statement of its reasons for not taking such action.".

(D) Section 1524(c) (2) is amended (i) by inserting "as determined
by the State Agency of the State" after "statewide health needs" each
place it occurs, and (ii) by inserting at the end of subparagraph (B)
the following : "If in preparing or revising the State health plan the
SHCC does not take an action proposed in a recommendation submitted
under section 1523(a) (1) (B), the SHCC shall when publishing such
plan make available to the public a ivritten statement of its reasons for
not taking such action".

(2) Section 1513(b) (2) is amended (A) by striking out "and" after
"resources of the area;", (B) by striking out "resources" and inserting
in lieu thereof "resources (including entities described in section 1532
(c) (7))", and (C) by inserting before the period at the end of the
first sentence a semicolon and the following : "(D) which are respon-
sive to statewide health needs as determined by the State health plan-
ning and development agency".

(d) (1) The first sentence of section 1513(b) (2) (as amended by
subsection (c) (2) ) is further amended by inserting before the period
at the end a semicolon and the follotving: "(E) which describe the
institutional health services (as defined in section 1531(5) ) needed to
provide for the well-being of persons receiving care within the health
service area, including, at a minimum, acute inpatent {including
psychiatric inpatient, obstetrical inpatient, and neonatal inpatient),
rehabilitation, and long-term care services; and (F) which describe
other health services needed to provide for the well-being of persons
receiving care within the health service area, including, at a minimum,
preventive, ambulatory, and home health services and treatment for
alcohol and drug abuse".

(2) Section 1513(b)(2) is amended by adding after the sentence
added by subsection (b) (2) the folloioing : "The HSP shall describe
the number and type of resources, including facilities, personnel, major
medical equipment, and other resources required to meet the goals of
the HSP and shall state the extent to which existing health care facili-
ties are in need of modernization, conversion to other uses, or closure

20

and the extent to which new health care facilities need to he constructed

or acquired.".

(3) Section 1524(c) (2(A) is amended by adding after the second
sentence the following new sentences: "The plan shall also describe
the institutional health services (as defined in section 1531(5) ) needed
to provide for the well-being of persons receiving care within the State,
including, at a minimum, acute inpatient (including psychiatric in-
patient, obstetrical inpatient, and neonatal inpatient), rehablitation,
and long-term care services; and also describe other health services
needed to provide for the well-being of persons receiving care within
the State, including, at a minimum, prevented, ambulatory, and home
health services and treatment for alcohol and drug abuse. The plan
shall also describe the number and type of resources, including facili-
ties, personnel, major medical equipment, and other resources required
to meet the goals of the plan and shall state the extent to which exist-
ing health care facilities are in need of modernization, conversion to
other uses, or closure and the extent to which new health care facilities
need to be constructed or acquired.''''

(e) Section 1513(b) (3) is amended (1) by inserting after "goals of
the HSP" in the first sentence the following : "as stated in the HSP
of the agency or, if revised under section 1524(c) (2) (A) when in-
cluded in the State health plan, as so revised)", and (2) by adding
at the end the following: "The AIP shall include a statement of the
personnel, facilities, and other resources tohich the agency determines
are required to meet the objectives described pursuant to the first sen-
tence. The AIP shall be established, annually reviwed, and amended
in accordance with the procedures set forth in the last two sentences of
paragraph (2). If the health systems agency is a public regional plan-
ning body or unit of general local government, the planning body or
unit of government shall be given a reasonable opportunity to com-
ment on the proposed AIP arid to propose additions to and other revi-
sions in it. Any such proposed additions or other revisions not included
in AIP approved by the agency shall be appended to the AIP".

(f) Section 1513(b) (2) (C) is amended by striking out "and is con-
sistent with".

(g) Section 1524(c) (2) is amended by adding at the end the

following :

"(C) The State health plan or any revised State health plan
approved by the SHOO shall be the State health plan for the
State for purposes of this title after it is approved by the Gov-
ernor of the State. The State health plan for a State may be disap-
proved by the Governor of the State onty if the Governor deter-
mines that the plan does not effectively meet the stateivide health
needs of the State as determined by the State Agency for the
State. In disapproving a State health plan, a Governor shall make
public a detailed statement of the basis for the determination that
the plan does not meet such needs and shall specify the changes
in the plan tohich the Governor determines are needed to meet
such needs. Subparagraph (B) does not apply to the preparation
of revisions of a State health plan disapproved by a Governor.

" (D) In carrying out its functions tvith respect to the goals
and resource reavirem^nts for mental health services of the State
health plan, the SHCC may establish a procedure under which per-

21

sons (acting as or as part of an advisory group or subcommittee

appointed by the SHCC) knowledgeable about mental health
services (including services for alcohol and drug abuse) will have
the opportunity to make recommendations to the SHCC respect-
ing such services.

"(E) The State health authority, the State mental health
authority, and other agencies of the State government, designated
by the Governor, shall carry out those parts of the State health
plan which relate to the government of the State.

" (F) If a State health plan as required by this subsection is not
in effect for a State, the Secretary may not make any grant under
section 1525 to the State Agency for such State".

(h) Section 1513(c) (2) is amended (1) by striking out "may" and
inserting in lieu thereof "shall", and (2) by inserting "in obtaining
and filling out the necessary forms and may provide other technical
assistance" after "technical assistance".

(i) (1) (A) The first sentence of section 1513(b) (2) is amended by
striking out "annually" and inserting in lieu thereof "triennially".

(B) The second sentence of section 1513(b) (2) is amended by strik-
ing out "Before establishing an HSP" and inserting in lieu thereof
"Before establishing or amending an HSP and in its review of an
HSP".

(2) The first sentence of section 1523(a) (2) and the first sentence
of section 1524(c) (2) (A) are each amended by striking out "and re-
view and revise as necessary (but at least annually)" and inserting in
lieu thereof ", review at least triennially, and revise as necessary".

(3) Section 1524(c) (1) (as amended by subsection (a) ) is amended
by striking out "review annually and coordinate the HSP and AIP"
and inserting in lieu thereof "review and coordinate at least triennially
the HSP and review at least annually the AIP".

(4) The third sentence of section 1524(c) (2) (A) is amended by
striking out "for each year".

(j) (1) Section 303(a) of the Comprehensive Alcohol Abuse and
Alcoholism Prevention, Treatment, and Rehabilitation Act of 1970 is
amended by adding after and below paragraph (16) the following:
"Such plan shall be consistent with the State health plan in effect for
such State under section 1524(c) of the Public Health Service Act".

(2) Section 409(e) of the Drug Abuse Office and Treatment Act of
1972 is amended by adding after and beloic paragraph (13) the follow-
ing: "Such plan shall be consistent with the State health plan in effect
for such State under section 1524(c) of the Public Health Service
Act.".

(k) (1) Section- 237(a) of the Community Mental Health Centers
Act is amended in the matter preceding paragraph (1) by inserting
"shall be consistent ivith the State health plan in effect for such State
under section 1524(c) of the Public Health Service Act and" before
"shall be".

(2) Paragraph (2) (D) (iv) of subsection (d) of section 314 of the
Public Health Service Act (as so redesignated by section 128(b)) is
amended by striking out "a plan" and inserting in lieu thereof "a plan
which is consistent with the State health plan in effect for the State
under section 1524(c) and".

22

CRITERIA AND PROCEDURES FOR REVIEWS

Sec. 116. (a)(1) The first sentence of section 1532(a) is amended
(A) by striking out "; and in performing" and inserting in lieu there-
of "/ in performing", and (B) by inserting before the period a semi-
colon and the following : "and in performing its review functions a
Statewide Health Coordinating Council shall (except to the extent
approved by the Secretary) follow procedures and apply criteria de-
veloped and published by the Council in accordance loith regulations
of the Secretary".

(2) The second sentence of such section is amended by striking out
"and States Agencies" and inserting in lieu thereof State Agencies,
and Statewide Health Coordinating Councils".

(b) (1) Subsections (b) and (c) of section 1532 are each amended —

(A) by striking out "agency and State Agency" each place it
occurs (other than in paragraph (11) of subsection (b) ) and in-
serting in lieu thereof "agency, State Agency, and Statewide
Health Coordinating Council", and

(B) by striking out "agency or State Agency" each place it
occurs and inserting in lieu thereof "agency, State Agency, or
Statewide Health Coordinating Council".

(2) Subsection (b) (If) of such section is amended by striking out
"agency or a State Agency" and inserting in lieu thereof "agency,
State Agency, or Statewide Health Coordinating Council".

(3) Section 1532(c)(1) is amended by striking out "HSP and
AIP" and inserting in lieu thereof "HSP, AIP, and State health
plan".

(c) Section 1532(a) is amended by adding at the end the follow-
ing: "Health systems agencies, the State Agency, and, if appropriate,
the Statewide Health Coordinating Council within each State shall
cooperate in the development of procedures and criteria under this
subsection to the extent appropriate to the achievement of efficiency in
their reviews and consistency in criteria for such reviews.".

(d) (1)(A) Section 1532(b)(1) is amended (i) by striking out
"Written" and inserting in lieu thereof "Timely written", and (ii) by
inserting before the period "and, if a person has asked the entity con-
ducting the review to place the person's name on a mailing list main-
tained by the entity, such notification shall be sent to such person".

(B) Section 1532(b) (7) is amended by striking out "Notification"
and inserting in lieu thereof "Timely notification".

(2) Section 1532(b) (2) is amended by adding at the end the fol-
lowing: "If, after a review has begun, a State Agency \ health sys-
tems agency, or Statewide Health Coordinating Council requires, in
accordance with paragraph (3), the person subject to the review to
submit information respecting the subject of the review, such person
shall be provided at least fifteen days to submit the information."

(3) Section 1532(b) is amended by adding after paragraph (11)
the following new paragraph:

"(12) The following procedural requirements with respect to pro-
ceedings under a certificate of need program :

"(A) Hearings under a certificate of need program shall be held
before a State Agency or a health systems agency to which the
State Agency has delegated the authority to hold such a hearing.

23

In a hearing under the program, any person shall have the right
to be represented by counsel and to present oral or written argu-
ments and evidence relevant to the matter which is the subject of
the hearing, any person directly affected by the matter which is
the subject of the hearing may conduct reasonable questioning of
persons who make factual allegations relevant to such matter, and
a record of the hearing shall be maintained. The requirements of
this subparagraph do not apply to hearings held by a health sys-
tems agency in the performance of a revietv under section 1513(f ) .

"(B) Any decision of a State Agency to issue or to not issue a
certificate of need or to withdraw a certificate of need shall be
based solely (i) on the review of the State Agency conducted in
accordance with procedures and criteria it has adopted in ac-
cordance with this section and regulations promulgated under this
section, and (ii) on the record established in administrative pro-
ceedings held with respect to the application for such certificate
or the Agency 's proposal to withdraw the certificate, as the case
may be. Any decision of a State Agency to approve or disapprove
an application for an exemption under section 1527(b) shall be
based solely on the record established in the administrative pro-
ceedings held with respect to the application

"(C) (i) The State Agency shall establish the period within
which approval or disapproval by the State Agency of applica-
tions for certificates of need and for exemptions under section
1527(b) shall be made. If, after a review has begun by the State
Agency, the State Agency or health systems agency requires, in
accordance with section 1532(b)(3), an applicant to submit in-
formation respecting the subject of the review, the period pre-
scribed pursuant to the preceding sentence shall, at the request of
the applicant, be extended fifteen days.

"(ii) If the State Agency fails to approve or disapprove an
application within the applicable period under clause (i), the ap-
plicant may, loithin a reasonable period of time following the ex-
piration of such period, bring an action in an appropriate State
court to require the State Agency to approve or disapprove the
application.

" (D) The program shall provide that each decision of the State
Agency to issue, not to issue, or to withdraw a certificate of need
or to approve or disapprove an application for an exemption un-
der section 1527 (b) shall, upon request of any person directly af-
fected by such decision, be administratively revieioed under an
appeals mechanism consistent with State law governmg the prac-
tices and procedures of administrative agencies or, if there is no
such State law, by an entity (other than the State Agency) des-
ignated by the Governor.

"(E) Any person adversely affected by a final decision of a
State Agency with respect to a certificate of need or an applica-
tion for an exemption under section 1527 '(b) and a health systems
agency if the decision respecting the certificate of need is incon-
sistent with a recommendation made by the agency to the, State
Agency toith respect to the certificate of need may, within a
reasonable period of time after such decision is made ( and any
administrative review of it completed) , obtain judicial review of

24

it in an appropriate State court. The decision of the State Agency
shall he affirmed upon such judicial review unless it is found to he
arbitrary or capricious or not made in compliance with applicable
law.

" (F) There shall be no ex parte contacts —

"(i) in the case of an application for a certificate of need,
between the applicant for the certificate of need, any person
acting on behalf of the applicant, or any person opposed to
the issuance of a certificate for the applicant and any person
in the State Agency ivho exercises any responsibility respect-
ing the application after the commencement of a hearing on
the applicant's application and before a decision is made with
respect for it; and

"(ii) in the case of a proposed withdrawal of a certificate
of need, between the holder of the certificate of need, any per-
son acting on behalf of the holder, or any person in favor of
the withdrawal and any person in the State Agency who ex-
ercises responsibility respecting withdrawal of the certificate
after commencement of a hearing on the Agency's proposal to
withdraw the certificate of need and before a decision is made
on withdrawal.

The requirements of this paragraph are in addition to the require-
ments of the other paragraphs of this subsection and may, as
appropriate, apply to other review programs".

(e) Section 1532(b) is amended by adding after paragraph (12)
(added by subsection (d)) the following new paragraph :

"(13) (A) In the case of reviews by health systems agencies
under section 1513(f) and by State Agencies under paragraphs
(It) and (5) of section 1523 (a) —

"(i) provision for applications to be submitted in accord-
ance with a timetable established by the reviewing agency,

"(ii) provision for such reviews to be undertaken in a
timely fashion, and

"(m) provision for all completed applications pertaining
to similar types of services, facilities, or equipment affecting
the same health service area to be considered in relation to
each other (but no less often than twice a year) .
"(B) In the case of revieios by health systems agencies under
section 1513(g) and by State Agencies under paragraph (6) of
section 1523(a), provision for reviews of similar types of institu-
tional health services affecting the same health service area to be
considered in relation to each other."

(f) Section 1532 (c)(6) is amended to read as follows :

"(6) In the case of health services proposed to be provided —

"(A) the availability of resources (including health man-
power, management personnel, and funds for capital and oper-
ating needs) for the provision of such services,

' (B) the effect of the means proposed for the delivery of
such services on the clinical needs of health professional train-
ing programs in the area in which such services are to be
provided,

"(C) if such services are to be available in a limited number
of facilities, the extent to which the health professions schools

25

in the area will have access to the services for training
purposes,

"(D) the availability of alternative uses of such resources
for the provision of other health services, and

"(E) the extent to which such proposed services will be
accessible to all the residents of the area to be served by such
services. ".

(g) (1) Section 1632(c) (9) (B) is amended by inserting uand on the
costs and charges to the public of providing health services by other
persons" after "construction project".

(2) Section 1532(c) (as amended by section 103(c) ) is amended by
adding at the end the following :

"(13) In the case of health services or facilities proposed to be
provided, the efficiency and appropriateness of the use of existing
services and facilities similar to those proposed".

"(14) In the case of existing services or facilities, the quality of
care provided by such services or facilities in the past".

(h) Section 1532(a) is amended by adding after the sentence added
by subsection (c) the following : "The Secretary shall review at least
annually regulations promulgated under this section and provide
opportunity for the submission of comments by health systems agen-
cies, State Agencies, and Statewide Health Coordinating Councils on
the need for the revision of such regulations. At least forty-five days
before the initial publication of a regulation proposing a revision in a
regulation of the Secretary under this section, the Secretary shall, with
respect to such proposed revision, consult with and solicit the recom-
mendations from health systems agencies, State Agencies, and State-
wide Health Coordinating Councils."

(i) (1) Section l$32(b) (3) is amended by adding at the end the
following : "Each health systems agency, State Agency, and Statewide
Health Coordinating Council shall develop procedures to assure that
requests for information in connection with a review- under this title
are limited to only that information which is necessary for the agency,
State Agency, or Statewide Health Coordinating Council to perform
the review",

(2) Section 1532(b) (10) is amended by striking out "pertinent"
and inserting in lieu thereof "essential".

CERTIFICATE OF NEED PROGRAMS

Sec. 117. (a) Part C of title XV is amended by adding at the end
tke following :

"certificate of need program

"Sec. 1527. (a) The certificate of need program required by section
1523(a) (4) (B) shall, in accordance with this section, provide for
the following:

"(1) Review and determination of need under such program
for —

U(A) major medical equipment and institutional health
services, and

"(B) capital expenditures,
shall be made before the time such equipment is acquired, such

26

services are offered, substantial expenditures are undertaken in
preparation for such offering, or capital expenditures are
obligated.

" (2) The acquisition and offering of only such equipment and
services as may be found by the State Agency to be needed; and
the obligation of only those capital expenditures found to be
needed by the State Agency. Except as otheerwise authorized by
this section, review under the program of an application for a
certificate of need may not be made subject to any criterion and the.
issuance of a certificate of need may not be made subject to any
condition unless the criterion or condition directly relates to —
" (A ) criteria prescribed by section 1532(c) ,
" (B ) criteria prescribed by regulations of the Secretary pro-
mulgated under section 1532(a) before the date of the en-
actment of the Health Planning and Resources Development
Amendments of 1979, or

"(C) criteria prescribed by regulation by the State Agency
in accordance with an authorization prescribed by State law.
The Secretary may not require a State to include in its program any
criterion in addition to criteria described in subparagraphs (A)
and (B).

"(3) An application for a certificate of need for an institutional
health service, medical equipment, or a capital expenditure shall
specify the time the applicant will require to make such service
or equipment available or to obligate such expenditure and a
timetable for making such service or equipment available or
obligating such expenditure. After the issuance of a certificate
of need, the State Agency shall periodically review the progress
of the holder of the certificate in meeting the timetable specified
in the approved application for the certificate. If on the basis of
such a review the State Agency determines that the holder of a
certificate is not meeting such timetable and is not making a good
faith effort to meet it, the State Agency may, after considering
any recommendation made by the health systems agency which
received a report from the State Agency on such review, with-
draw the certificate.

u(4) In issuing a certificate of need, the State shall specify
in the certificate the maximum amount of capital expenditures
which may be obligated under such certificate. The program
shall, in accordance with regulations promulgated by the Sec-
retary, prescribe the extent to which a project authorized by a
certificate of need shall be subject to further review if the amount
of capital expenditures obligated or expected to be obligated for
the project exceed the maximum specified in the certificate of
need.

u(5) The program shall provide that (A) the requirements of
section 1532 shall apply to proceedings under the program, and
(B) each decision to issue a certificate of need (i) may only be
issued by the State Agency, and (ii) shall, except in emergency
circumstances that pose a threat to public health, be consistent
with the State health plan in effect for such State under section
1524(c).

27

"(b) (1) Under the program a State shall not require a cer-
tificate of need for the offering of an inpatient institutional health
service or the acquisition of major medical equipment or the obli-
gation of a capital expenditure for the provision of an inpatient
institutional health service by —

"(^L) a health maintenance organization or a combination
of health maintenance organizations if (i) the organization
or combination of organizations has, in the service area of
the organization or the service areas of the organizations in
the combination, an enrollment of at least 50,000 individuals,
(ii) the facility in which the service will be provided is geo-
graphically located so that the service will be reasonably
accessible to such enrolled individuals, and (Hi) at least 75
percent of the patients who can reasonably be expected to
receive the institutional health service will be individuals
enrolled with such organization or organizations in the
combination;

"(B) a health care facility which (i) primarily provides
inpatient health services, (ii) is controlled directly or indi-
rectly, by a health maintenance organization or a combination
of health maintenance organizations ivhich has, in the serv-
ice area of the organization or service areas of the organiza-
tions in the combination* an enrollment of at least 50,000
individuals, (Hi) the facility is geographically located *o that
the service iviU be reasonably accessible to such enrolled in-
dividuals, and (iv) at least 75 percent of the patients who
can reasonably be expected to receive the institutional health
service will be individuals enrolled with such organization
or organizations in the combination, or

"(C) a health care facility (or portion thereof) whieh (i)
is leased by a health maintenance organization or combina-
tion of health maintenance organizations which has, in the
service area of the organization or the service areas of the
organizations in the combination, an enrollment of at least
50,000 individuals and on the date the application is sub-
mitted under paragraph (2) at least fifteen years remain in
the term of the lease, ( ii) the facility is geographically located
so that the service will be reasonably accessible to such en-
rolled individuals, and (Hi) at least 75 percent of the patients
who can reasonably be expected to receive the institutional
health service will be individuals enrolled with such
organization,

if, with respect to such offering, acquisition, or obligation, the
State Agency has, upon application under paragraph (2) , granted
an exemption from such requirement to the organization, com-
bination of organizations, or facility.

"(2) A health maintenance organization, combination of health
maintenance organizations, or health care facility shall not be
exempt under paragraph (1) from obtaining a certificate of need
before offering an institutional health service, acquiring major
medical equipment, or obligating capital expenditures unless —

28

"(A) it has submitted, at such time and in such farm arid
manner as the State Agency shall prescribe, an application
for such exemption,

"(B) the application contains such information respecting
the organization, combination, or facility and the proposed
offering, acquisition, or obligation as the State Agency may
require to determine if the organization, combination, or
facility meets the requirements of paragraph (l),and

"(C) the S tate A gency approves such application,
"(3) Notwithstanding subsection (d), a health care facility
(or any part thereof) or medical equipment with respect to which
an exemption was granted under paragraph (1) may not be sold
or leased and a controlling interest in such facility or equipment
or in a lease of such facility or equipment may not be acquired and
a health care facility described in subparagraph (C) of para-
graph (1) which was granted an exemption under paragraph
(1) may not be used by any person other than the lessee described
in such subparagraph unless —

"(A) the State Agency issues a certificate of need approv-
ing the sale, lease, acquisition, or use, or

"(B) the State Agency determines, upon application, that
(i) the entity which the facility or equipment is proposed to
be sold or leased or which intends to acquire the controlling
interest is a health maintenance organization or a combina-
tion of health maintenance organizations which meets the
requirements of clause (i) of subparagraph (A) of paragraph
(1) and (ii) with respect to such facility or equipment, the
entity meets the requirements of clauses (ii) and (Hi) of
such subparagraph (A ) .

"(4) Under the program a State may apply its certificate
of need requirements to the institutional health services,
major medical equipment, and capital expenditures of a
health maintenance organization or of a health care facility
which is controlled, directly or indirectly, by a health main-
tenance organization only to the extent that the organization
or facility is not exempt under paragraph (1) and then only
to the offering of inpatient institutional health services, the
acquisition of major medical equipment, and the obligation
of capital expenditures.

"(5) Notwithstanding section 1532(c), if a health main-
tenance organization or a health care facility which is con-
trolled, directly or indirectly, by a health maintenance or-
ganization apply for a, certificate of need, such application
shall be approved by the State Agency if the State Agency
finds (in accordance with criteria prescribed by the Secretary
by regulation) that —

"(1) approval of such application is required to meet the
needs of the members of the health maintenance organization
and of the new members lohich such organization can reason-
ably be expected to enroll, and

(2) the health maintenance organization is unable to pro-
vide, through services or facilities which can reasonably be

29

expected to he available to the organization, its institutional
health services in a reasonable and cost-effective manner
which is consistent with the basic method of operation of the
organization and which makes such services available on a
long-term basis through physicians and other health pro-
fessionals associated with it.
Except as provided in subsection (b) and notwithstanding subsection
(d),a health care facility (or any part thereof) or medical equipment
with respect to which a certificate of need was issued under this sub-
section may not be sold or leased and a controlling interest in such
facility or equipment or in a lease of such facility or equipment may
not be acquired unless the State Agency issues a certificate of need ap-
proving the sale or acquisition or lease.".

"(c) Notwithstanding section 1532(c), an application for a certifi-
cate of need for a capital expenditure which is required —

"(1) to eliminate or prevent imminent safety hazards as de-
fined by Federal, State, or local fire, building, or life safety codes
or regulations,
"(2) to comply with State licensure standards, or
"(3) to comply with accreditation standards compliance with
which is required to receive reimbursements under title XVIII of
the Social Security Act or payments under a State plan for medi-
cal assistance approved under title XIX of such Act,
shall be approved unless the State Agency finds that the facility or
service with respect to which such capital expenditure is proposed to
be made is not needed or that the obligation of such capital expenditure
is not consistent with the State health plan in effect under section 152J±.
An application for a certificate of need approved under this subsection
shall be approved only to the extent that the capital expenditure is re-
quired to eliminate or prevent the hazards described in paragraph (1)
or to comply with the standards described in paragraph (2) and (3).

"(d) (1) Under the program a certificate of need shall, except as
provided in subsection (b)< be required for the obligation of a capital
expenditure to acquire (either by purchase or under lease or compa-
rable arrangement) an existing health care facility if —

"(A) the notice required by paragraph (2) is not filed in ac-
cordance with that paragraph with respect to such acquisition, or
"(B) the State Agency finds, ivithin thirty days after the date
it receives a notice in accordance with paragraph (2) with respect
to such acquisition, that the services or bed capacity of the facility
will be changed in being acquired.
"(2) Before any person enters into a contractual arrangement to
acquire an existing health care facility which arrangement will require
the obligation of a capital expenditure, such person shall notify the
State Agency of the State in which such facility is located of such
person's intent to acquire such facility and of the services to be offered
in the facility and its bed capacity. Such notice shall be made in writ-
ing and shall be made at least thirty days before contractual arrange-
ments are entered into to acquire the facility with respect to which the
notice is given.

"(e)(1)(A) Except as provided in subsection (b) and subparagraph
(B) , under the program a certificate of need shall not be required for

30

the acquisition of major medical equipment which will not be owned
by or located in a health care facility unless —

" (i) the notice required by paragraph (2) is not filed in accord-
ance with that paragraph with respect to such acquisition, or
u(ii) the State Agency finds, within thirty days after the date
it receives a notice in accordance with paragraph (2) with respect
to such acquisition, that the equipment will be used to provide
services for inpatients of a hospital.
"(B) The certificate of need program of a State may include a
requirement for a certificate of need for an acquisition of major medi-
cal equipment which requirement is in addition to the requirement for
a certificate of need established by subparagraph (A), except that
after September 30, 1982, the certificate of need program of a State
may not be changed to include any such additional requirement.

"■(#) Before any person enters into a contractual arrangement to ac-
quire major medical equipment ichich will not be owned by or located
in a health care facility, such person shall notify the State Agency
of the State in which such equipment will be located of such per-
son's intent to acquire such equipment and of the use that will be made
of the equipment. Such notice shall be made in writing and shall be
made at least thirty days before contractual arrangements are entered
into to acquire the equipment with respect to which the notice is
given.

"(3) For purposes of this subsection, donations and leases of major
medical equipment shall be considered acquisitions of such equipment,
and an acquisition of medical equipment through a transfer of it for
less than fair market value shall be considered an acquisition of major
medical equipment if its fair market value is at least $150,000.

"(f) Notwithstanding section 1532(c), when an application is made
by an osteopathic or allopathic facility for a certificate of need to con-
struct, expand, modernize, acquire major medical equipment, or add
services, the need for that construction, expansion, modernization, ac-
quisition of equipment, or addition of services shall be considered on
the basis of the need for and the availability in the community of serv-
ices and facilities for osteopathic and allopathic physicians and their
patients. The State Agency shall consider the application in terms of
its impact on existing and proposed institutional training programs
for doctors of osteopathy and medicine at the student, internship, and
residency training levels.

u(g) In approving or disapproving applications for certificates of
need or in withdrawing certificates of need under such a program, a
State Agency shall take into account recommendations made by health
systems agencies tvithin the State under section 1513(f) .".

(b)(1) Section 1523(a) (4) (B) is amended (A) by striking out
"new institutional health services proposed to be offered or developed
within the State" and inserting in lieu thereof "the obligation of capi-
tal expenditures within the State and the offering ivithin the State of
new^ institutional health services and the acquisition of major medical
equipment", and (B) by striking out "which is satisfactory to the Sec-
retary" and inserting in lieu thereof "which is consistent with stand-
ards established by the Secretary by regulation".

(2) The second sentence of section 1523(a) (If) is amended to read
as follows: "A certificate of need program shall provide for proce-
dures and penalties to enforce the requirements of the program".

31

(3) Section 1531 is amended (i) by striking out "For purposes of
this title" and inserting in lieu thereof "Except as otherwise provided,
for purposes of this title", and (ii) by adding after paragraph (5) the
follmoing new paragraphs :

"(6) For purposes of sections 1523 and 1527, the term ' capital ex-
penditure'1 means an expenditure —

"(A) made by or on behalf of a health care facility (as such
a facility is defined in regulations prescribed under paragraph
(5) ) ; and

"(B) (i) which (I) under generally accepted accounting prin-
ciples is not properly chargeable as an expense of operation and
maintenance, or (ii) is made to obtain by lease or comparable
, arrangement any facility or part thereof or any equipment for a
facility or part,' and

"(ii) which (I) exceeds the expenditure minimum (II) sub-
stantially changes the bed capacity of the facility with respect to
which the expenditure is made, or (III) substantially changes
the services of such facility.
For purposes of subparagraph (B) (ii) (I), the cost of any studies,
surveys, designs, plans, working drawings, specifications, and other
activities essential to the acquisition, improvement, expansion, or re-
placement of any plant or equipment with respect to which an ex-
penditure described in subparagraph (B) (i) is made shall be in-
cluded in determining if such expenditure exceeds the expenditure
minimum. Donations of equipment or facilities to a health care facil-
ity which if acquired directly by such facility would be subject to
review under section 1527 shall be considered capital expenditures for
purposes of sections 1523 and 1527, and a transfer of equipment or
facilities for less than fair market value shall be considered a capital
expenditure for purposes of such sections if a transfer of the equip-
ment or facilities at fair market value would be subject to review un-
der section 1527. For purposes of this paragraph, the term ''expendi-
ture minimum1 means $1500)0 for the twelve-month period begin-
ning with the month in which this paragraph is enacted and for each
twelve-month period thereafter, $150,000 or, at the discretion of the
State, the figure in effect for the preceding twelve-month period, ad-
justed to reflect the change in the precedinq twelve-month period in
an index maintained or developed by the Department of Commerce
and designated by the Secretary by regulation for purposes of making
such adjustment.

"(7) For purposes of sections 1523 and 1527, the term ^major medi-
ical equipment* means medical equipment which is used for the provi-
sion of medical and other health services and which costs in excess of
$150,000, except that such term does not include medical equipment
acquired by or on behalf of a clinical laboratory to provide clinical
laboratory services if the clinical laboratory is independent of a phy-
sician's office and a hospital and it has been determined under title
XVIII of the Social Security Act to meet the requirements of para-
graphs (10) and (11) of section 1861 (s) of such Act. In determining
whether medical equipment has a value in excess of $150,000, the value
of studies, surveys, designs, plans, working drawings, specifications,
other activities essential to the acquisition of such equipment shall be
included.

32

"(8) The term 'health maintenance organization' means <i public or
private organization, organized under the laws of any State,^which —

"(A) is a qualified health maintenance organization under
section IS 10(d) ; or

"(B)(i) provides or otherwise makes available to enrolled
participants health care services, including at least the following
basic health care services: usual physician services, hospitaliza-
tion, laboratory, X-ray, emergency and preventive services, and
out of area coverage; (ii) is compensated (except for copayments)
for the provision of the basic health care services listed in clause
(i) to enrolled participants by a payment which is paid on a
periodic basis without regard to the date the health care services
are provided and which is fixed without regard to the frequency,
extent, or hind of health service actually provided; and (Hi) pro-
vides physicians' services primarily (I) directly through physi-
cians who are either employees or partners of such organizations,
or (II) through arrangements with individual physicians or one
or more groups of physicians (organized on a group practice or
individual practice basis). ,",

(4) (A) Section 1522(b) (IS) is amended (i) by striking out "(3),",
(ii) by inserting "in a timely manner" after "reviewed" in subpara-
graph (A), and (Hi) by inserting after "agencies," in subparagraph
(A ) the following : "or, if there is no such State law ",

(B) Section 1522(b) (13) (B) is amended by inserting "under sub-
paragraph (A)" after "the reviewing agency",

(5) Section 1532(c) (8) is amended by striking out "for which assist-
ance may be yyrovided under title XIII",

(c) The Comptroller General shall conduct an evaluation of the
exemption authority provided by section 1527(b) of the Public Health
Service Act. In conducting the evaluation, the Comptroller General
shall determine —

(1) the health maintenance organizations, combinations of
health maintenance organizations, and health care facilities which
have applied to receive an exemption under that section,

(2) the services, facilities, and equipment with respect to which
applications have been submitted under that section,

(3) the impact of the exemption on existing contractual ar-
rangements between health maintenance organizations and health
care facilities and on plans of such organizations respecting such
arrangements, and

(4) the impact of the exemption on health care delivery systems,
including its impact on the cost, availability, accessibility, and
quality of health care.

The Comptroller General shall report the results of the evaluation to
the Committee on Labor and Human Resources of the Senate and the
Committee on Interstate and Foreign Commerce of the House of Rep-
resentatives not later than February 1, 1982.

(d) Within one hundred and eighty days of the date of the enactment
of this Act, the Secretary of Health, Education, and Welfare shall
promulgate such regulations as may be necessary to enable the States
to establish certificate of need programs which meet the requirements
of section 1527 of the Public Health Service Act.

33

APPROPRIATENESS REVIEW

Sec. 118. (a)(1) Section. 1631(g)(1) is amended by striking out
"all institutional health services offered m the health service area of
th-e agency" and inserting in lieu thereof "at least those institutional
and home health services which are offered in the health service area
of the agency and, with respect tn which goals have been established
in the State health plan",

(2) Section 1523(a) (6) is amended by striking out "all institutional
health services being offered in the State" and inserting in lieu thereof
"all institutional and home health services which are offered in the
State and with respect to which goals have been established in the
State health plan".

(b)(1) Section 1513(g) is amended by lidding at the end the
following:

"(3) In making the appropriateness review required by para-
graph (1) of a health service, each health systems agency shall at
least consider the need, for the service, its accessibility and, avail-
ability, financial viability, cost effectiveness, and the quality of
service provided",
(2) Section 1523(a) (6) is amended by adding at the end the follow-
ing: "In making the appropriateness review required by this para-
graph of a health service, the State Agency shall at least consider the
need for the service, its accessibility and availability, financial via-
bility, cost effectiveness, and the quality of service provided."

REVIEW and approval of proposed uses of federal funds

Sec, 119. (a) Section 1524-(o) (6) is amended —

(1) by striking out "approve or disapprove" in the first sen-
tence and inserting in lieu thereof "recommend approval or dis-
approval of (A)",

(2) by striking out "or the Comprehensive" in the first sentence
and inserting in lieu thereof "section 109 of the Drug Abuse
Office and Treatment Act of 1972, or the Comprehensive",

(3) by inserting before the period at the end of the first sen-
tence a comma and the following: "and (B) any application (and
any revision of an application) submitted to the Secretary by a
State for a grant or contract under any provision of law referred
to in douse (A) for projects in more than one health service area
of the State",

(4) by amending the third sentence to read as follows: "If a
SHCC recommends disapproval of such a plan or application,
the Secretary, after making a finding that such plan or applica-
tion is not in conformity with the State health plan, may not make
Federal funds available under such State plan or application.",

(5) by inserting after the third sentence the following new sen-
tence: "If the Secretary makes such a -finding, he shall notify the
Governor of his finding and the reasons therefor and advise Mm
that he has thirty days in which to submit a revised State plan or
application thai conforms with the State health plan", and

(6) by striking out "If after such review" in the last sentence
and inserting in lieu thereof the following: "If after reviewing a

34

recommendation of a SHOO to disapprove such State plan or
application",
(b) (1) Section 1513(e) (1) (A) (i) is amended—

(A) by inserting "of 1972" after "Treatment Act", and ^

(B) by inserting after "health resources" the following : "by
any entity other than the government of a State unless such re-
sources are solely within the health service area of such agency".

(2) Section 1513(e) (1) (A) (ii) is amended by striking out "an al-
lotment" and inserting in lieu thereof "an allotment, contract, or
grant".

(3) The first sentence of section 1513(e) (1) (B) is amended by strik-
ing out "under title IV, VII, or VIII of this Act" and all that follows
in such sentence and inserting in lieu thereof the following : "for re-
search or training unless the grants or contracts are to be made, entered
into, or used for the development, expansion, or support of health
resources which, in the case of grants or contracts for training, would
make a significant change in the health services available in the health
service area or which, in the case of grants or contracts for research,
would significantly change the delivery of health services, or the dis-
tribution or extent of health resources, available to persons in the
health service area other than those who are participants in such
research".

(If,) Section 1513(e) (2) is amended —

(A) by striking out "such paragraph" in the first sentence and
inserting in lieu thereof "paragraph (1) (A) (i)", and

(B) by striking out "If" in the second sentence and inserting in
lieu thereof "If under paragraph (1) (A) (i)".

(5) Section 1513(e) is amended by redesignating paragraph (3) as
paragraph (4-) and by inserting after paragraph (2) the following
new paragraph :

"(3) The Governor of a State shall allow health systems agencies
sixty days to make the review required by paragraph (1) (A) (ii). If
under such paragraph an agency disapproves a proposed use of Fed-
eral funds in its health service area, the Governor may not make such
Federal funds available for such use until he has made, upon request
of the entity making such proposal, a revieio of the agency decision. In
making any such revieio of any agency decision, the Governor shall
give the State health planning and development agency an opportunity
to consider the decision of the health systems agency and to submit to
the Governor its comments on the decision. The Governor, after taking
into consideration such State Agency comments (if anu), may make
such Federal funds available for such use, notwithstanding the disap-
proval of the health systems agencu. Each such decision by the Gov-
ernor to make funds available shall be submitted to the appropriate
health systems agency anal State health planning and development
agencu and shall contain a detailed statement of the reasons for the
decision".

COORDINATION OF HEALTH PLANNING WITH RATE REVIEW

Sec. 120. (a) Section 1513(d) is amended (1) by redesignating para-
graph (i) as paragraph (5) ; (2) by striking out uand" in paragraph

35

(3); and (3) by adding after paragraph (3) the following new
paragraph :

" (4) any entity of the State in ivhich the agency is located which
reviews the rates or budgets of health care facilities located in the
agency's health service area, and".

(b) Section 1522(b) (7) (A) is arwended by inserting before the
comma at the end the following : "and for the coordination by the
State Agency in the conduct of its activities ivith any entity of the
State which reviews the rates or budgets of health care facilities m
the State".

(c) (1) Section 1526 is amended —

(A) by striking out "(not later than six months after the date
of the enactment of this title)''' in the first sentence of subsection
(a) ; and

(B) by striking out the last sentence of subsection (a).
(2) Sueh section is further amended —

(A) by inserting before the period in the first sentence of sub-
section (a) "or to any other entity of the government of a State
which has so indicated an intent to regulate sueh rates" ;

(B) by striking out "A State Agency" in subsection (b)(1) and
inserting in lieu thereof "An entity" ;

(C) by striking out "the State Agency" in subparagraphs (A)
and (F) of such subsection and inserting in lieu thereof "the
entity" ' ;

(D) by inserting "if it is a State Agency" after "(D)" and
" (E) respectively, in siwh subsection;

(E) by adding after and below subparagraph (G) of such
subsection the folloicing : "If an entity which is not a State Agency
receives a grant under subsection (a), such entity shall coordi-
nate its activities under the grant with the State Agency for the
State in which such entity is located, share with the State Agency
data obtained from such activities, and for purposes of such
activities, develop with the State Agency criteria for the review
of institutional health services, equipment, and facilities which
guidelines are not in conflict with criteria adopted by the State
Agency" ;

(F) by striking out "a State Agency" in subsection (b)(2) and
inserting in lieu thereof "an entity" and by striking out "the
State Agency" in such subsection and inserting in lieu thereof
"the entity" ; and

(G) by striking out "State Agency" in subsection (d) and in
the first sentence of subsection (c) and inserting in lieu thereof
"entity".

COORDINATION WITHIN STANDARD METROPOLITAN STATISTICAL AREAS AND

WITH OTHER ENTITIES

Sec 121. (a) Section 1513(d) is amended (1) by inserting "(in-
cluding area agencies on aging and local and regional alcohol abuse,
drug abuse, and mental health planning agencies)" after "adminis-
trative agencies" in paragraph (3) .

36

(b) Subsection (d) of section 1513 (as amended by section 120(a) )
is amended (1) by inserting "(i)" after "(d)", (2) by redesignating
paragraphs (1), (2), (3), (4), (o) as subparagraphs (A), (B),
(67), (D), <z?W (A7), respectively, and (3) by adding at the end the
following :

" (£) ZsWA health systems agency which has all or part of its health
service area within a part of a standard metropolitan statistical area
(as determined by the Office of Management and Budget) shall coor-
dinate its activities with the activities of any other health systems
agency which has any part of its health service area within such
standard metropolitan statistical area. Such coordination shall at least
provide that each health systems agency designated for a health serv-
ice area within any part of a single standard metropolitan statistical
area shall review (A) each HSP and AIP for each such health service
area, (B) the criteria used in accordance with section 1532 for reviews
affecting any such area, and (C) each decision under certificate of need
programs which affect any such area.

" (3) The Secretary shall by regulation provide for the sharing by -
health systems agencies of health planning data with Indian tribes and
Alaska Native Villages.

"(4) Health systems agencies that have an Indian tribe or inter-
tribal Indian organization (referred to in subsection (e) (1) (B)) lo-
cated within such agencies'1 health service areas shall carry out their
functions under this section in a manner that recognizes tribal self-
determination. Such agencies shall seek to enter into agreements with
the Indian tribes and intertribal organizations located within their
health service area^s on matters of mutual concern as defined in regula-
tions of the Secretary".

(c) Section 1513(e) is amended by inserting "as defined in section
4(b) of the Indian Self -Determination and Education Assistance
Act)" after "Indian tribe" in paragraph (1) (B).

COLLECTION AND PUBLICATION OF HOSPITAL CHARGES

Sec. 122. (a) Subsection (h) of section 1513 is amended to read as
follows :

"(h)(1) Each health systems agency shall collect annually on a form
developed in consultation with the State health planning and develop-
ment agency (or agencies) the rates charged for each of the twenty -
five most frequently used hospital services in the State (or States) in-
cluding the average semiprivate and private room rates.

"(2) Each health systems agency shall make available to the public
for inspection and copying (at a reasonable expense to the public) the
information supplied to the health systems agency pursuant to this
subsection in readily understandable language and in a manner de-
signed to facilitate comparisons among the hospitals in the health sys-
tems agency's health service area".

(b) Section 1522(b) (5) is amended by adding before the semicolon
the following : "and contain provisions to assure compliance with re-
quests for information made by health systems agencies in accordance
with section 1513 (h)".

37

STATE HEALTH PLANNING AND DEVELOPMENT AGENCIES

Sec. 123. (a) /Section 1521(b)(4) is amended (1) by vnserting
"(A)" after "(4)"; (2) by inserting "upon a revieio under section
1535 of the State Agency' 's operation and performance of its function"
before "he determines" ; (3) by adding at the end of paragraph (4)
the following: "Before renewing an agreement under this paragraph
with a State Agency for a State, the Secretary shall provide each
health systems agency designated for a health service area located (in
whole or in part) in such State and the Statewide Health Coordi-
nating Council of sueh State an opportunity to comment on the per-
formance of the State Agency and to provide a recommendation on
whether such agreement should be renewed." ; and (4) adding at the
end thereof the following new subparagraph:

U(B) If upon a revieio under section 1535 of the State Agency *s
operation arid performance of its functions, the Secretary determines
that it has not fulfilled, in a satisfactory manner, the responsibilities
of a State Agency during the period of the agreement to be renewed
or if the applicable State administrative program does not continue
to meet the requirements of section 1522, he may terminate such agree-
ment or return the State Agency to a conditionally designated status
under paragraph (2) of subsection (b) for a period not to exceed
twelve months. At the end of such period, the Secretary shall either
terminate its agreement with such State Agency or enter into an
agreement with such State Agency under paragraph (3) of subsection
(b). The Secretary may not take the action authorized by the first
sentence of this subparagraph unless the Secretary has —

"(i) provided the State Agency with notice of his intent to re-
turn it to a conditional status or terminate the agreement with it
and included in that notice specification of any functions which
the Secretary has determined the State Agency did not satisfac-
torily fulfill and of any requirements which the Secretary has
determined it has not met;

"(ii) provided the State Agency with a reasonable opportunity
for a hearing, before an officer or employee of the Department of
Health, Education, and Welfare designated for such purpose, on
the action proposed to be taken by the Secretary; and

"(Hi) in the case of a proposed termination, consulted with the
National Council on Health Planning and Development respect-
ing the termination".
(b)(1)(A) Paragraphs (3) and (4) of section 1521(b) are each
amended by striking out "twelve months" and inserting in lieu thereof
"thirty -six months".

(B) The amendments made by subparagraph (A) shall apply with
respect to designation agreements entered into under section 1521 ( b )
(3) of the Public Health Service Act after the date of the enactment
of this Act. j

(2) Section 1521(b) (3) is amended—

(A) by inserting " (A ) " after " (3) ",

(B) by redesignating subparagraphs (A) and (B) as clauses
(i) and (ii), respectively,

38

(C) by amending clause (ii) (as so redesignated) to read as
follows:

"(ii) by the Secretary if the Secretary determines, in accord-
ance witti suoparagrapn (B), tiiat the designated State Agency
is not comptymg wtth ihe provisions of sacti agreement", and

(D) by adding at the end the following :

"(B) Before the Secretary may terminate an agreement with a
designated State Agency under subparagraph (A) (ii), the Secretary
shad —

"(i) consult with the Statewide Health Coordinating Council
of the State for which the State Agency is designated respecting
ttie proposed termination,

" (ii) give the State Agency notice of the intention to terminate
the agreement and in the notice specify with particularity (I) the
basis for trie determination of the Secretary that the State Agency
is not in compliance witti the agreement, and (II) the actions that
the State Agency should take to come into compliance with the
agreement, and

"(Hi) provide the State Agency with a reasonable opportunity
for a hearing, before an officer or employee of the Department of
Health, Education, and w eifare designated for such purpose, on
the matter specified in the notice.
The Secretary may not terminate such an agreement before consulting
with the National Council on Health Planning and Development re-
specting the proposed determination. Before the Secretary may permit
t/ie term of an agreement to expire witlxout renewing the agreement,
the Secretary shall make the consultations prescribed by clause (i) and
the preceding sentence, give the State Agency with which the agree-
ment was made notice of the intention not to renew the agreement and
the reasons for not renewing the agreement, and provide, as prescribed
by clause (Hi), the State Agency an opportunity for a hearing on
the matter specified in the notice".

(c) (1) (A) Section 1522(b) (13) is amended by striking out ", (g),
or ( A) " and inserting in lieu thereof "or (g) ".

(B\ Section 1513(a) is amended by striking out "through (h)" and
inserting in lieu thereof "through (g)".

(2) Paragraph (3) of section 1523(a) is amended by striking out
"review of the State medical facilities plan required under section
1603, and in the".

(3) Section 1523(a) is amended by adding after paragraph (6) the
following new paragraph :

"(7) Prepare an inventory of the health care facilities (other
than Federal health care facilities) located in the State and eval-
uate on an ongoing basis the physical condition of such facilities.
Such inventory and evaluations shall be reported to the health
systems agencies designated for health service areas located (in
ivhole or in part) in the State for purposes of the functions of
the agency under section 1513(b) .".

(d) Subsection Adq of section 1521 is amended to read as follows:
' (d)(1) If an agreement under subsection (b)(3) for the designa-
tion of a State Agency for a State is not in effect upon the expiration
of—

39

U(A) the fourth fiscal year which begins after the calendar year
in which the National Health Planning and Resources Develop-
ment Act of 197 % is enacted; or

"(B) (i) if the legislature of the State is in a regular session on
the date of the enactment of the Health Planning and Resources
Development Amendments of 1979 and the legislature will be in
session for at least twelve months from such date, or

"(ii) if the legislature of the State is in session on such date of
enactment but twelve months do not remain in such session after
such date ar if the legislature of the State is not in session an such
date, twelve months after the beginning of the first regular session
of the legislature beginning after such date,
whichever occurs later, the Secretary shall take the action prescribed
by paragraph (2).

"(2) // upon the expiration of the period applicable under para-
graph (1) an agreement is not in effect for the designation of a State
Agency for a State, the Secretary shall until such an agreement is in
effect take the following action:

"(A) During the first twelve months after the date of the
expiration of the applicable period, the Secretary shall reduce by
25 percent the amount of each allotment, grant, loan, and loan
guarantee made to and each contract entered into with an individ-
ual or entity in such State during such period under this Act, the
Community Mental Health Centers Act, the Comprehensive
Alcohol Abuse and Alcoholism Prevention, Treatment, and
Rehabilitation Act of 1970, and the Drug Abuse Office and Treat-
ment Act of 1972.

"(B) During the second twelve months after such expiration
date, the Secretary shall reduce by 50 percent the amount of each
such allotment, grant, loan, loan guarantee, and contract.

U(C) During the third twelve months after such expiration date,
the Secretary shall reduce by 75 percent the amount of each such
allotment, grant, loan, loan guarantee, and contract.

"(D) After the expiration of thirty-six months after such
expiration date, the Secretary may not make or enter into any
such allotment, grant, loan, loan guarantee, or contract".

(e) (1) Section 1522(c) is amended by striking out "once each year"
and inserting in lieu thereof "once every three years".

(2) Section 1523(a) (as amended by subsection (c) (3) ) is amended
by adding the following new paragraph at the end thereof ;

"(8) Provide technical assistance to individuals and public and
private entities in obtaining and filling out the necessary forms
for the development of projects and programs.".

(f) The first sentence of section 1521(b) (2) (B) is amended by in-
serting before the period a comma and the following: "except tha'
the Secretary may extend the period for such additional time as he
finds appropriate if he finds that the designated State Agency is mak-
ing a good faith effort to comply with the requirements of section
1523".

(g) (1) Paragraph (5) of section 1523(a) is amended by striking
out "1413(f ) " and inserting in lieu thereof "1513 (f) ".

(2) Section 1521(b) (1) is amended by striking out "this part" and
inserting in lieu thereof "this title".

40

STATEWIDE HEALTH COORDINATING COUNCIL COMPOSITION

Sec, 124. (a) (1) Section 1524(b) (1) (A) (ii) is amended by insert-
ing before the period a comma and the following: "except that the
number of representatives on the SHGC to which a health systems
agency designated for a health service area which is not entirely
ivithin the State shall be a number which is based on the relationship of
the population of the portion of such health service area withm the
State to the population of the Largest health service area located en-
tirely ivithin the State, except that each such agency shall be entitled
to at least one representative on the SHGC".

(2) Section 1524(b) (1) (A) (Hi) is amended to read as follows:

" (Hi) Except as other-wise provided in clause (ii) and this
clause, each such health systems agency shall be entitled to at
least two representatives on the SHCC. If there are more than
ten health systems agencies within a State, each health systems
agency within such State shall be entitled to at least one repre-
sentative on the SHCC. Of the representatives of health systems
agencies on the SHCC, not less than one-half shall be individuals
who are consumers of health care and who are not providers
of h-ealth care?.

(3) Section 1524(b) (1) (A) (i) is amended (A) by inserting "(or
if the number of representatives on the SHCC to which health sys-
tems agencies are entitled under the seco-nd sentence of clause (Hi)
is less than sixteen, no fewer than the number to which they are en-
titled)" after "sixteen representatives", (B) by striking out "at least
five", and (C) by adding at the end the following: "Each agency shall
submit a number of nominees to the Governor ivhich is at least twice
the number of representatives on the SHCC to which the agency is
entitled".

(4) Section 1524(b)(1) is amended by adding at the end thereof
the following new paragraph :

"(E) Members of the SHCC who are consumers of health care
and who are not providers of health care shall include individuals
iv ho represent rural and, urban medically underserved popula-
tions if such populations exist in the State"

( b ) Section 1524 (b) (2) is amended to read as follows :

"(2) The Governor may select, by and with the advice and consent
of the State senate, or, in the case of a State with a unicameral legis-
lature, of the State legislature^ the chairman of the SHCC from among
the members of the SHCC. If the Governor does not select the chair-
man, the SHCC shall select the chairman from among its members.".

(c) (1) Section 1524(b)(1)(C) is amended by striking out "one-
third" and inserting in lieu thereof "one-half".

(2) Section 1524(b) (1) (D) is amended by striking out "two" and
insertinq in lieu thereof "one".

(d) The first sentence of section 1524(c) (2) (B) is amended by strik-
ing out "State agency" and inserting in lieu thereof "State Agency".

CENTERS FOR HEALTH PLANNING

Sec. 125. (a) Section 1534(b) (1) is amended (1) by inserting "and
it ivill be able to provide assistance and dissemination of information
to health systems agencies and State Agencies as provided in subsec-

41

Hons (a) and (c)" after "paragraph (2) and (2) by inserting " and
is able to provide suck assistance and dissemination of information"
after "such requirements".

(b) Clause (2) of section 1534(c) is ainended to read as follows:
"(2) shall develop and use methods (satisfactory to the Secretar-y) to
disseminate to such agencies and State Agencies planning approaches,
methodologies (including methodologies to provide for education of
new board menibers and new staff and continuing education of board
members and staff of such agencies and State Agencies), policies,
and standards".

DEFINITIONS

Sec. 126. (a) (1) Section 1531(5) is amended to read as follows:

"(5) The term ' institutional health services^ means health services
which (A) are provided through private and. public hospitals, re-
habilitation facilities, nursing homes, and other health care facilities,
as defined by the Secretary by regulation, and (B) entail annual oper-
ating costs of at least $75,000. For purposes of this paragraph, the
term 'expenditure minimum' means $75,000 for the tivelve-month pe-
riod beginning with the month in ivhich this paragraph is enacted and
for each twelve-month period thereafter, $75,000 or, at the discretion
of the State, the figure in effect for the preceding twelve-month period,
adjusted to reflect the change in the preceding twelve-month period
in an index maintained or developed by the Department of Commerce
and designated by the Secretary by regulation for purposes of making
such adjustment".

(2) After the date of the enactment of this Act, the Secretary shall
consult with the Committee on Labor and Human Resources of the
Senate and the Committee on Interstate and Foreign Commerce of
the House of Representatives before promidgating regulations defin-
ing health care facilities for purposes of section 1531 (5) of the Public
Health Service Act as amended by paragraph (1).

(b) Section 1531 is amended by adding after paragraph (8) (added
by section 117 of this Act) the following new paragraphs :

"(9) For purposes of sections 1523(a) (4) (B), 1527, and 1531(5),
the term 'rehabilitation facility'' means an inpatient facility ivhich is
operated for the primary purpose of assisting in the rehabilitation of
disabled persons through an integrated program of medical and other
services which are presided under competent professional supervision,.
F or "purposes of the remaining 'provisions of this title, the term 're-
habilitation facility'' means an inpatient facility described in the pre-
ceding sentence and, in addition, an outpatient facility which is
operated as described in such sentence.

"(10) The term 'medically underserved population'' has the same
meaning as such term has under section 330(b)(3).

"(11) Any reference to the term 'health^ includes physical and
mental health.

" (12) The term 'physician' means a doctor of medicine or osteopathy
legally authorized to practice medicine and surgery by a State".

A UTHORIZA TIONS

Sec. 127. (a) Section 1516(d) (1) (as amended by section 106) is
amended —

(1) by striking out "and" after "1976,", and

42

(2) by inserting before the period the following: $150fi00,000
for the fiscal year ending September SO, 1980," $165,000 fiOO for
the fiscal year ending September 30, 1981, and $185,000fX)0 for
the -fiscal year ending September SO, 1982''.

( b ) Section 1525 ( c) is amended —

(1) by striking out "and" after "1976", and

(2) by inserting before the period the following: ", $S5fiOO,000
for the fiscal year ending September SO, 1980, $4-0,000,000 for the
fiscal year ending September SO, 1981, and $45,000,000 for the
-fiscal year ending September SO, 1982".

(c) Section 1526(e) is amended —

(1 ) by striking out "and" after "1976", and

(2) by inserting before the period the following : ", $6,000,000
for the -fiscal year ending September SO, 1980, $6,000300 for the
fiscal year ending September SO, 1981, and $6,000,000 for the
■fiscal year ending September SO, 1982".

( d ) Section 1534 (d) is amended —

(1) by striking out "and" after "1976", and

(2) by inserting before the period the following : ", $6,000,000
fiscal year ending September SO, 1981, and $10,000,000 for the
fiscal year ending September SO, 1982".

( e ) Section 16Ifi (d) is amended —

(1) by striking out "and" after "1976", and

(2) by inserting before the period the folloicing : ", $20,000,000
for the fiscal year ending September SO, 1981, and $30,000,000 for
the fiscal year ending September 30, 1982".

TECHNICAL AMENDMENT

Sec. 128. Section 1903(m) (2) (C) of the Social Security Act -is
amended by striking out "the date the entity enters into a contract
with the State under this title for the provision of health services
on a prepaid i^isk basis" and inserting in lieu thereof "the date the
entity qualifies as a health maintenance organization (as determined
by the Secretary)".

EFFECTIVE DATE

Sec. 129. (a) The amendments made by this title (other than by
sections 101, 102, 103, 104(c), 105(d), 106, 107, 117, 123(b), 127, and
128) shall take effect one year after the date of the enactment of this
Act, except that on and after the date of the enactment of this Act —

(1) the changes in the membership of the health systems agen-
cies and the Stateivide Health Coordinating Councils required
by amendments to sections 1512, 1524, and 1531 shall be imple-
mented through selections of members to fill vacancies occurring
after such date,

(2) a health systems agency, a State health planning and devel-
opment agency, and a Statewide Health Coordinating Council
may make the organizational and related changes required by
the amendments to sections 1512, 1522, 1523, 1524, and 1531 of
the Public Health Service Act, and

(3) health systems agencies, State health planning and devel-
opment agencies, and Statewide Health Coordinating Councils

43

' may act in accordance with the changes in their junctions made
by the amendments to sections 1513, 1522, 1523, 1524, and 1532
of the Public Health Service Act.
(b)(1) Except as provided in section 1516(c) (1) (C) (i) of the
Public Health Service Act as amended by section 106, the amendments
made by section 106 shall apply with respect to grants made under
section 1516 of the Public Health Service Act after the date of the
enactment of this Act from appropriations under an appropriation
Act enacted for the fiscal year ending September 30, 1980.

(2) The amendments made by section 117 shall take effect on ttte
enactment of this Act, except that if the Secretary of Health, Edu-
cation, and Welfare determines that any amendment made by such
section will require a State to change its laws before the State health
planning and development agency designated for such State may
perform its functions under section 1523(a) (4-) (B) of the Public
Health Service Act, such amendment shall take effect in such State —

(A) if the legislature of the State is in a regular session on the
date of the enactment of the Health Planning and Resources
Development Amendments of 1979 and the legislature will be in
session for at least twelve months from such date, twelve months
from such date, or

(B) if the legislature of the State is in session on such date
of enactment but twelve months do not remain in such session
after such date or if the legislature of the State is not in sesion
on such date, twelve months after the beginning of the first
regular session of the legislature beginning after such date.

TITLE II— REVISION OF AUTHORITY FOR HEALTH
RESOURCES DEVELOPMENT

REVISION AND EXTENSION OF ASSISTANCE

Sec. 201. (a) Part B of title XVI is repealed.
(b)(1) Subsections (a) and (b) of section 1620 are amended to read
as follows :

"(a)(1) The Secretary, during the period ending September 30,
1982, may, in accordance with this part, make loans from the fund es-
tablished under section 1622(d) to any public or nonprofit private en-
tity for projects for —

"( A) the discontinuance of unneeded hospital services or facil-
ities,

U(B) the conversion of unneeded hospital services and facilities
to needed health services and medical facilities, including out-
patient medical facilities and facilities for long-term care;

"(C) the renovation and modernization of medical facilities,
particularly projects for the prevention or elimination of safety
hazards, projects to avoid noncompliance loith licensure or ac-
creditation standards, or projects to replace obsolete facilities;

"(D) the construction of new outpatient medical facilities; and

"(E) the construction of new inpatient medical facilities in
areas tohich have experienced (as determined by the Secretary)
recent rapid population growth.

44

"(2) (^4) The Secretary, during the period ending September 30,
1982, may, in accordance with this part, guarantee to —

"(i) non-Federal lenders for their loans to public and nonprofit
private entities for medical facilities projects described in para-
graph (1), and

" (ii) the Federal Financing Bank for its loans to public and
nonprofit private entities for such projects,
payment of principal and interest on such loans.

"(B) In the case of a guarantee of any loan to a public or nonprofit
private entity under subparagraph (A) (i) which is located in an ur-
ban or rural poverty area, the Secretary may pay, to the holder of such
loan and for and on behalf of the project for which the loan was made,
amounts sufficient to reduce by not more than one half the net effective
interest rate otherwise payable on such loan if the Se(yretary finds that
without such assistance the project could not be undertaken.

u(b) The principal amount of a loan directly made or guaranteed
under subsection (a) for a medical facilities project, when added to
any other assistance provided such project under part B, may not ex-
ceed 90 per centum of the cost of such project unless the project is lo-
cated in an area determined by the Secretary to be an urban or rural
poverty area, in which case the principal amount, when added to other
assistance under part B, may cover up to 100 per centum of such costs.".

(2) Section 1622(b) (2) (D) is amended by striking out "minus 3 per
centum per annum" and inserting in lieu thereof the following: "minus
any interest subsidy made in accordance with section 1620(b) (2) with
respect to a loan made for a project located in an urban or rural poverty
area".

(3) Section 1622(e) (2) is amended (A) by striking out "and" after
"1977," and (B) by inserting before the period a comma and the fol-
lowing: "September 30, 1979, September 30, 1980, September 30, 1981,
and September 30, 1982".

(c) Section 1625 is amended to read as follows:

"project grants

"Sec. 1625. (a) (1)(A) The Secretary may make grants for con-
struction or modernization projects designed to —

"(i) eliminate or prevent in medical facilities imminent safety
hazards as defined by Federal, State, or local fire, building, or life
safety codes or regulations, or

"(ii) avoid noncompliance by medical facilities with State or
voluntary licensure or accreditation standards.
"(B) A grant under subparagraph (A) may only be made to —
"(i) a State or political subdivision of a State, including any
city, town, county, borough, hospital district authority, or public
or quasi-public corporation, for any medical facility owned or op-
erated by the State or political subdivision; and

"(ii) a nonprofit private entity for any medical facility owned
or operated by the entity but only if the Secretary determines —
" (/) the level of community service provided by the facil-
ity and the proportion of its patients who are unable to pay
for services rendered in the facility is similar to such level
and proportion in a medical facility of a State or political
subdivision, and

45

"(//) that without a grant under subparagraph (A) there
would be a disruption of the provision of health care to low-
income individuals.

" (2) The amount of any grant under paragraph (1) may not exceed
75 per centum of the cost of the project for tohich the grant is made un-
less the project is located in an area determined by the Secretary to be
an urban or rural poverty area, in which case the grant may cover up to
100 per centum of such costs.

li{3) There are authorized to be appropriated for grants under par-
agraph (1) $40 POO fiOO for the peal year ending September SO, 1980,
$50^000,000 for the fiscal year ending September 30, 1981, and
$50,000,000 for the fiscal year ending September SO, 1982. Funds avail-
able for obligation under this subsection (as in effect before the date of
the enactment of the Health Planning and Resources Development
Amendments of 1979) in the fiscal year ending September SO, 1979,
shall remain available for obligation under this subsection in the suc-
ceeding fiscal' year.

"(b) (1) The Secretary may make grants to public and nonprofit
private entities for projects for (A) construction or modernization of
outpatient medical facilities which are located apart from hospitals
and which will provide services for medically underserved popula-
tions, and (B) conversion of existing facilities into outpatient medi-
cal facilities or facilities for long-term care to provide services for
such populations.

"(2) The amount of any grant under paragraph (1) may not ex-
ceed 80 per centum of the cost of the project for which the grant is
made unless the project is located in an area determined by the Secre-
tary to be an urban or rural poverty area, in which case the grant may
cover up to 100 per centum of such costs.

" (3) There are authorized to be appropriated for grants under para-
graph (1) $15,000,000 for the fiscal year ending September SO, 1981,
and $15,000,000 for the fiscal year ending September SO, 1982.".

CONFORMING AMENDMENTS

Sec. 202. (a) Part A of title XVI is repealed and parts C, D, E,
and F of title XVI are redesignated as parts A, B, C, and D,
respectively.

{b) Part C (as so redesignated) of title XVI is amended by striking
out section 1630, by redesignating section 1631 through 1635 as section
1622 through 1626, respectively, and by inserting before section 1622
(as so redesignated) the following :

"general regulations

"Sec. 1620. The Secretary shall by regulation —

"(1) prescribe the manner in which he shall determine the
priority among projects for ichich assistance is available under
part A or B, based on the relative need of different areas for such
projects and giving special consideration —

"(A) to projects for medical facilities serving areas with
relatively small financial resources and for medical facilities
serving rural communities,

50-674 0-79-6

46

" (B) in the case of projects for modernisation of medical
facilities, to projects for facilities serving densely populated
areas,

"(C) in the case of projects for construction of outpatient
medical facilities, to projects that will be located in, and pro-
vide services for residents of, areas determined by the Secre-
tary to be rural or urban poverty areas,

"(D) to projects designed to (i) eliminate or prevent im-
minent safety hazards as defined by Federal, State, or local
fire, building, or life safety codes or regulations, or (ii) avoid
noncompliance with State or voluntary licensure or accredita-
tion standards, and

"(E) to projects for medical facilities which, alone or in
conjunction with other facilities, loill provide .comprehensive
health care, including out-patient and preventive care as well
as hospitalization;
" (2) prescribe for medical facilities projects assisted under part
A or B general standards of construction, modernization, and
equipment, which standards may vary on the basis of the class of
facilities and their location; and

" (3) prescribe the general manner in which each entity which
receives financial assistance under part A or B or has received fi-
nancial assistance under part A or B or title VI shall be required
to comply ivith the assurances required to be made at the time such
assistance was received and the means by which such entity shall
be required to demonstrate compliance with such assurances.
An entity subject to the requirements prescribed pursuant to para-
graph (3) respecting compliance with assurances made in connection
with receipt of financial assistance shall submit periodically to the
Secretary data and information ivhich reasonably supports the en-
tity's compliance with such assurances. The Secretary may not waive
the requirement of the preceding sentence.

"applications

"Sec. 1621. (a) No loan, loan guarantee, or grant may be made under
part A or B for a medical facilities project unless an application for
such project has been submitted to and approved by the Secretary.
If two or more entities join in a project, an application for such proj-
ect may be filed by any of such entities or by all of them.

"(b)(1) An application for a medical facilities project shall be
submitted in such form and manner as the Secretary shall by regula-
tion prescribe and shall, except as provided in paragraph (2), set
forth —

"(A) in the case of a modernization project for a medical fa-
cility for continuation of existing health services, a finding by
the State Agency of a continued need for such services, and, in
the case of any other project for a medical facility, a finding by
the State Agency of the need for the new health services to be
provided through the medical facility upon completion of the
project;

"(B) in the case of an application for a grant, assurances satis-
factory to the Secretary that (i) the applicant making the appli-
cation would not be able to complete the project for which the

47

application is submitted ivithout the grant applied for, and (ii)
in the case of a project to construct a new medical facility, it would
be inappropriate to convert an existing medical facility to provide
the services to be provided through the new medical facility ;

u(0) in the case of a project for the discontinuance of a service
or facility or the conversion of a service or a facility, an evalua-
tion of the impact of such discontinuance or conversion on the
provision of health care in the health service area in which such
service was provided or facility located;

U(B) a description of the site of such project;

" (E) plans and specifications therefor which meet the require-
ments of the regulations prescribed under section 1620(2) ;

U(F) reasonable assurance that title to such site is or will be
vested in one or more of the entities filing the application or in a
public or other nonprofit entity which is to operate the facility
on completion of the project;

"(G) reasonable assurance that adequate financial support will
be available for the completion of the project and for its main-
tenance and operation when completed, and, for the purpose of
determining if the requirements of this subparagraph are met,
Federal assistance provided directly to a medical facility which is
located in an area determined by the Secretary to be an urban or
rural poverty area or through benefits provided individuals served
at such facility shall be considered as financial support;

U(H) the type of assistance being sought under part A or U
for the project;

"(/) reasonable assurance that all laborers and mechanics em-
ployed by contractors or subcontractors in the performance of
work on a project will be paid ivages at rates not less than those
prevailing on similar construction in the locality as determined
by the Secretary of Labor in accordance with the Act of March 3,
1931 (Ifi U.S.C. 276a—276a-5, known as the Davis-Bacon Act),
and the Secretary of Labor shall have with respect to such labor
.standards the authority and functions set forth in Reorganiza-
tion Plan numbered 14 of 1950 (IS FR 8176; 5 U.S.C. Appendix)
and section 2 of the Act of June IS, 1934 (40 U.S.C. 276c) ;

" (J) in the case of a project for the construction or moderniza-
tion of an outpatient facility, reasonable assurance that the serv-
ices of a general hospital will be available to patients at such
facility who are in need of hospital care; and

"(K) reasonable assurance that at all times after such applica-
tion is approved (i) the facility or portion thereof # to be con-
structed, modernized, or converted will be made available to all
persons residing or employed in the area served by the facility,
and (ii) there will be made available in the facility or portion
thereof to be constructed, modernized, or converted a reasonable
volume of services to persons unable to pay therefor and the
Secretary, in determining the reasonableness of the volume of
services provided, shall take into consideration the extent to which
compliance is feasible from a financial viewpoint.
(2) (A) The Secretary may waive —

"(i) the requirements of subparagraph (D) of paragraph (1)
for compliance with modernization and equipment standards
prescribed pursuant to section 1620(2) , and

48

"(ii) the requirement of subparagraph (E) of paragraph (1)
respecting title to a project site,
in the case of an application for a project described in subparagraph
(B) of this paragraph.
"(B) A project referred to in subparagraph (A) is a project —
"(i) for the modernization of an outpatient medical facility
which will provide general purpose health services, which is not
part of a hospital, and which will serve a medically underserved
population as defined in section 1621^ or as designated by a health
systems agency, and

" (ii) for which the applicant seeks a loan under part A the
principal amount of which does not exceed $20,000.".
(c) Part C (as so redesignated) of title XVI is amended by adding
at the end thereof the following new section:

"enforcement of assurances

"Sec. 1627. The Secretary shall investigate and ascertain, on a pe-
riodic basis, with respect to each entity which is receiving financial
assistance under this title or which has received financial assistance
under title VI or this title, the extent of compliance by such entity
with the assurances required to be made at the time such assistance
was received. If the Secretary finds that such an entity has failed to
comply with any such assurance, the Secretary shall report such
noncompliance to the health systems agency for the health service
area in which such entity is located and the State health planning
and development agency of the State in which the entity is located
and shall take any action authorized by law (including an action for
specific performance brought by the Attorney General upon request
of the Secretary) which will effect compliance by the entity with such
assurances. An action to effectuate compliance with any such assurance
may be brought by a person other than the Secretary only if a com-
plaint has been filed by such person with the Secretary and the Secre-
tary has dismissed such complaint or the Attorney General has not
brought a civil action for compliance with such assurance within six
months after the date on lohich the complaint was filed with the
Secretary".

TECHNICAL AMENDMENTS

Sec. 203. (a) Part A (as so redesignated) of title XVI is amended —

(1) by striking out section 1621 and by redesignating sections
1620 and 1622 as sections 1601 and 1602, respectively,

(2) by striking out "section 1622(d)" in subsection (a) (1) of
section 1601 (as so redesignated) and inserting in lieu thereof
"section 1602(d)", and

(3) by striking out "section 1620(b) (2)" each place it occurs
in subsection (d) of section 1602 (as so redesignated) and in-
serting in lieu thereof "section 1601 (a) (2) (B)".

(b) Section 1625 of part B (as so redesignated) is redesignated as
section 1610.

(c) Subsection (a)(1) of section 1622 (as so redesignated) is
amended by striking out "section 1604-" and inserting in lieu thereof
"section 1621".

49

(d) Section 16*23 (as so redesignated) is amended by striking out
"STATE" in the heading for such section.

(e) Section 162 % (as so redesignated) is amended by striking out
paragraphs (1) and (2) and by redesignating paragraphs (3) through
(16) as paragraphs (1) through (14) ^ respectively.

(f) Section 1626 (as so redesignated) is amended by striking out
"section 160 If and inserting in lieu thereof "section 1621".

(g) (1) Section 1602 (as so redesignated) is amended by adding
at the end thereof the following :

"(f) (1) The Secretary may take such action as may be necessary
to prevent a default on a loan made or guaranteed under this part or
under title VI, including the waiver of regulatory conditions, de-
ferral of loan payments, renegotiation of loans, and the expenditure
of funds for technical and consultative assistance, for the temporary
payment of the interest and principal on such a loan, and for other
purposes. Any such expenditure made under the preceding sentence
on behalf of a medical facility shall be made under such terms and
conditions as the Secretary shall prescribe, including the imple-
mentation of such organizational, operational, and financial reforms
as the Secretary determines are appropriate and the disclosure of such
■financial or other information as the Secretary may require to de-
termine the extent of the implementation of such reforms.

" (2) The Secretary may take such action, consistent ivith State law,
respecting foreclosure procedures as he deems appropriate to pro-
tect the interest of the United States in the event of a default on a
loan made or guaranteed under this part or under title VI, includ-
ing for a reasonable period of time taking possession of, holding, and
using real property pledged as security for such a loan or loan
guarantee.".

(2) Paragraph (1) of subsection (d) is amended (A) by striking
out "and" at the end of subparagraph (D), (B) by striking out the
period at the end of subparagraph (E) and inserting in lieu thereof

and", and (C) by adding after subparagraph (E) the following:
"(F) to enable the Secretary to take the action authorized by
subsection (f).".

(3) Paragraph (2) of subsection (d) is amended (A) by striking
out "and" at the end of subparagraph (I)), (B) by inserting "and"
at the end of subparagraph (E), and (C) by adding after subpara-
graph (E) the following:

"(F) to enable the Secretary to take the action authorized
by subsection (f) ,".

EFFECTIVE DATE

Sec. 204. The amendments made by this title shall take effect Octo-
ber i, 1979, except that the amendments made by section 201(b) re-
specting the payment of an interest subsidy for a loan or loan
guarantee made under part A of title XVI of the Public Health Service
Act shall apply only with respect to loans and loan guarantees made
after October 1. 1979, and with respect to loans and loan guarantees
made under such part before such date the Secretary shall continue
to pay the interest subsidy authorized for such loans and loan guaran-
tees before such date.

50

TITLE III— PROGRAM TO ASSIST AND ENCOURAGE THE
DISCONTINUANCE OF UNNEEDED HOSPITAL SERVICES

AUTHORIZATION OF PROGRAM

Sec. SOI. (a) Title XVI, as amended by title II of this Act, is
amended by adding at the end the following new "part :

"PART E PROGRAM TO ASSIST AND ENCOURAGE THE VOLUNTARY DISCON-
TINUANCE OF UNNEEDED HOSPITAL SERVICES AND THE CONVERSION OF
UNNEEDED HOSPITAL SERVICES TO OTHER HEALTH SERVICES NEEDED BY
THE COMMUNITY

^ESTABLISHMENT OF PROGRAM

uSec. 1641. The Secretary shall, by April 1, 1980, establish a pro-
gram under which —

"(1) grants and technical assistance may be provided to hos-
pitals in operation on the date of the enactment of this part (A)
for the discontinuance of unneeded hospital services, and (B) for
the conversion of unneeded hospital services to other health serv-
ices needed by the community; and

"(2) grants may be provided to State Agencies designated
under section 1521 (b) (3) for reducing excesses in resources and
facilities of hospitals.

"grants for discontinuance and conversion

"Sec. 161$. (a) (1) A grant to a hospital under the program shall
be subject to such terms and conditions as the Secretary may by reg-
ulation prescribe to assure that the grant is used for the purpose for
which it was made.

"(2) The amount of any such grant shall be determined by the
Secretary. The recipient of such a grant may use the grant —

"(A) in the case of a grantee which discontinues the provision
of all inpatient hospital services or an identifiable part of a hos-
pital facility which provides inpatient hospital services, for the
liquidation of the outstanding debt on the facilities of the grantee
used for the provision of the services or for the liquidation of
the outstanding debt of the grantee on such identifiable part;

U(B) in the case of a grantee which in discontinuing the pro-
vision of an inpatient hospital service converts or proposes to
convert an identifiable part of a hospital facility used in the pro-
vision of the discontinued service to the delivery of another
health service, for the planning, development (including con-
struction and acquisition of equipment), and delivery of the
health service;

U(C) to provide reasonably termination pay for personnel of
the grantee who will lose employment because of the discon-
tinuance of hospital services made by the grantee, retraining of
such personnel, assisting such personnel in securing employment,
and other costs of implementing arrangements described in sub-
section (c) ; and

51

"(Z>) for such other costs which the Secretary determines may
need to be incurred by the grantee in discontinuing hospital
services.

"(b)(1) No grant may be made to a hospital unless an application
therefor is submitted to and approved by the Secretary. Such an ap-
plication shall be in such form and submitted in such manner as the
Secretary may prescribe and shall include —

U(A) a description of each service to be discontinued and, if a
part of a hospital is to be discontinued or converted to another
use in connection with such discontinuance, a description of such
part;

"(B) an evaluation of the impact of such discontinuance and
conversion on the provision of health car\i in the health service
area in which such service is provided;

U(C) an estimate of the change in the applicant's costs which
will result from such discontinuance and conversion; and

U(D) reasonable assurance that all laborers and mechanics em-
ployed by contractors or subcontractors in the performance of
work on a project will be paid wages at rates not less than those
prevailing on similar construction in the locality as determined by
the Secretary of Labor in accordance with the Act of M arch 3, 1931
(40 U.S.C. 276a-276ao, known as the Davis-Bason ActQ, and
the Secretary of Labor shall have ivith respect to such labor stand-
ards the authority and functions set forth in Reorganization Plan
Numbered 14 of 1950 (15 FR 3176; 5 U.S.C. Appendix) and sec-
tion 2 of the Act of June 13, 1934 (40 U.S.C. 276c) ;

U(E) such other information as the Secretary may require.
" (2) (A) The health systems agency for the health service area in
'which is located a hospital applying for a grant under the program
shall (i) in making the review of the applicant 's application under
section 1513(e), determine the need for each service or part proposed
to be discontinued by the applicant, (ii) in the case of an application
for the conversion of a facility, determine the need for each service
which will be provided as a result of the conversion, and (Hi) make a
recommendation to the State Agency for the State in which the appli-
cant is located respecting approval by the Secretary of the applicants
application.

"(B) A State Agency which has received a recommendation from a
health systems agency under subparagraph (A) respecting an ap-
plication shall, after consideration of such recommendation, make a
recommendation to the Secretary respecting the approval by the
Secretary of the application. A State Agency's recommendation under
this subparagraph respecting the approval of an application (i)
shall be based upon (I) the need for each service or part proposed
to be discontinued by the applicant, (II) in the case of an application
for the conversion of a facility, the need for ea^h service tohich will
be provided as a result of the conversion, and (III) such other criteria
as the Secretary may prescribe, and (ii) shall be accompanied by the
health systems agency's recommendation made with respect to the
approval of the application.

"(C) In determining, under subparagraphs (A) and (B), the need
for the service (or services) or part proposed to be discontinued or
converted by an applicant for a grant, a health systems agency and

52

State Agency shall give special consideration to the unmet needs
and existing access patterns of urban or rural poverty populations.

" (3) (A) The Secretary may not approve an application of a hospi-
tal for a grant —

"(i) if a State Agency recoTwnended that the application not
be approved, or

"(ii) if the Secretary is unable to determine that the cost of
providing inpatient health services in the health service area in
which the applicant is located tvill be less than if the inpatient
health services proposed to be discontinued were not discontinued.
"(B) In considering applications of hospitals for grants the Secre-
tary shall consider the recommendations of health systems agencies
and State Agencies and shall give special consideration to applica-
tions (i) which will assist health systems agencies and State Agencies
to meet the goals in their health systems plans and State health plans,
or (ii) which will result in the greatest reduction in hospital costs
within a health service area.

"(c) (1) Except as provided in paragraph (3), the Secretary may
not approve an application submitted under subsection (b) unless
the Secretary of Labor has certified that fair and equitable arrange-
ments have been made to protect the interests of employees affected
by the discontinuance of services against a ivorsening of their posi-
tions with respect to their employment, including arrangements to
preserve the rights of employees under collective-bargaining agree-
ments, continuation of collective-bargaining rights consistent with
the provisions of the National Labor Relations Act, reassignment of
affected employees to other jobs, retraining programs, protecting pen-
sion, health benefits, and other fringe benefits of affected employees,
and arranging adequate severance pay, if necessary.

"(2) The Secretary of Labor shall by regulation prescribe guide-
lines for arrangements for the protection of the interests of employees
affected by the discontinuance of hospital services. The Secretary of
Labor shall consult with the Secretary of Health, Education, and Wel-
fare in the promulgation of such guidelines. Such guidelines shall first
be promulgated not later than the promulgation of regulations by the
Secretary for the administration of the grants authorized by section
1641.

"(3) The Secretary of Labor shall review each application sub-
mitted under subsection (b) to determine if the assurances described
in paragraph (1) have been provided with the application and if they
are satisfactory and shall notify the Secretary respecting his determi-
nation. Such review shall be completed within —

"(A) ninety days from the date of the receipt of the applica-
tion from the Secretary of Health, Education, and Welfare, or

"(B) one hundred and ttoenty days from such date if the Secre-
tary of Labor has by regulation prescribed the circumstances
under which the review will require at least one hundred and
twenty days.

If within the applicable period, the Secretary of Labor does not notify
the Secretary of Health, Education, and Welfare respecting his deter-
mination, the Secretary of Health, Education, and Welfare shall re-
view the application to determine if the applicant has provided the
assurances described in paragraph (1) and if such assurances are sat-

53

is factory. The Secretary may not approve the application unless he
determines that such assurances have been provided and that they are
satis facto?*y.

"(d) The records and audits requirements of section 705 shall apply
with respect to grants made under subsection (a).

"(e) For purposes of this part, the term 'hospitaV means, with re-
spect to any fiscal year, an institutior*, {including a distinct part of an
institution participating in the programs established under title
XVIII of the Social Security Act) —

" (1) which satisfies paragraphs (1) and (7) of section 1861 (e)
of such Act,

"(2) imposes charges or accepts payments for services provided
to patients, and

" (3) the average duration of a patient's stay in which was
thirty days or less in the preceding fiscal year,
but such term does not include a Federal hospital or a psychiatric hos-
pital (as described in section 1861(f) (1) of the Social Security Act).

"grants to states for reduction of excess hospital capacity

"Sec. 1643. (a) For the purpose of demonstrating the effectiveness
of various means for reducing excesses in resources and facilities of
hospitals (referred to in this section as 'excess hospital capacity'), the
Secretary may make grants to State Agencies designated under section
1521 (b)(3) to assist such Agencies in —

"(1) identifying (by geographic region or by health service)
excess hospital capacity,

"(2) developing programs to inform the public of the costs
associated with excess hospital capacity,

" (3) developing programs to reduce excess hospital capacity in
a manner ichich will produce the greatest savings in the cost of
health care delivery,

" (4) developing means to overcome barriers to the reduction
of excess hospital capacity,

" (5) in planning, evaluating, and carrying out programs to de-
certify health care facilities providing health services that are not
appropriate, and

u(6) any other activity related to the reduction of excess hos-
pital capacity.

"(b) Grants under subsection (a) shall be made on such te?vns and
conditions as the Secretary may prescribe.

"authorization of appropriations

"Sec. 1644. To make payments under grants under sections 1642 and
1643 there are authorized to be appropriated $30,000,000 for the fiscal
year ending September 30, 1980. $50,000,000 for the fiscal year ending
'September 30, 1981, and $75,000,000 for the peal year ending Septem-
ber 30, 1982, except that in any fiscal year not more than 10 percent of
the amount appropriated under this section may be obligated for
grants under section 1643".

(b) Section 1624 & amended by striking out "For purposes cf this
title" and inserting in lieu thereof "Except as provided in section
1642(f) , for purposes of this title".

54

STUDY

Sec. 302. The Secretary of Heath, Education, and Welfare shall
conduct a study of the effect on the. elimination of unneeded hospital
services made during the two fiscal year period ending September 30,
1981, by the program authorized by part E of title XVI of the Public
Health Service Act. The Secretary shall not later than J anuary 1, 1982,
report the results of the study to Congress together with his recom-
mendations for any revisions in the program under such part E which
he determines to be appropriate, including any revision in the author-
izations of appropriations for grants under such program.

And the House agree to the same.

That the Senate recede from its disagreement to the amendment of
the House to the title of the bill and agree to the same.

Harley O. Staggers,
Henry A. Waxman,
Davil E. Satterfield,
Richardson Preyer,
James T. Broyhill,
Tim Lee Carter,
Managers on the Part of the House.
Edward M. Kennedy,
Harrison A. Williams, Jr.,
Gaylord Nelson,
Alan Cranston,
Claiborne Pell,
Richard S. Schweiker,
Jacob K. Javits,
Orrin G. Hatch,
Managers on the Part of the Senate.

JOINT EXPLANATORY STATEMENT OF THE
COMMITTEE OF CONFERENCE

The managers on the part of the House and the Senate at the
conference on the disagreeing votes of the two Houses on the amend-
ments of the House to the bill (S. 544) to amend titles XV and XYI
of the Public Health Service Act to revise and extend the authorities
and requirements under those titles for health planning and health
resources development, submit the following joint statement to the
House and the Senate in explanation of the effect of the action agreed
upon by the managers and recommended in the accompanying con-
ference report:

The Senate recedes from its disagreement to the amendment of the
House to the title of the bill.

The House amendment to the text of the bill struck out all of the
Senate bill after the enacting clause and inserted a substitute text.

The Senate recedes from its disagreement to the amendment of
the House with an amendment which is a substitute for the Senate
bill and the House amendment. The differences between the Senate
bill, the House amendment, and the substitute agreed to in confer-
ence are noted below, except for clerical corrections, conforming
changes made necessary by agreements reached by the conferees, and
minor drafting and clarifying changes.

Title I — Revision of Health Planning Authority

REVISION AND REPORTING ON NATIONAL GUIDELINES FOR HEALTH

PLANNING

Reporting on Health Planning

The House amendment contains a provision, not included in the
Senate bill, which requires the Secretary of the Department of HEW
to review on an annual basis the goals and standards established as
part of the Xational Guidelines for Health Planning. In carrying
out this review, the plans developed at the State and areawide level
should be reviewed and used as a basis for revising existing or de-
veloping new goals or standards. The Secretary is also required to
collect data to determine whether the health care delivery systems
are changing to meet the standards and goals included in the Guide-
lines and the resources required to meet the goals. The Secretary shall
rely on the health systems agencies, the State health planning and
development agencies and other entities to assemble and report such
data. The Secretary is also required periodically to make, a public
statement about the goals contained in the health systems plans and
the State health plans and to summarize the resources required to
meet them (section 101(a) and (b)).

(55)

56

The conference substitute conforms to the House amendment ex-
cept that the Secretary may collect data to determine whether the
health care delivery systems meet or are changing to meet the goals
contained in HSA and State health plans (section 101(a) and (b)).

The conferees encourage the Secretary to actively pursue the collec-
tion of data under this section so that the Federal Government may
better benefit from the planning which takes place at the local and
State levels.

CONSULTATION REQUIREMENTS

The House amendment contains a provision, not included in the
Senate bill, which requires the Secretary to consult with various
groups at least 45 days prior to initial publication or revision of the
National Health Planning Guidelines (section 101(a)).

The conference substitute conforms to the House amendment (sec-
tion 101 (a)).

UNIQUE NEEDS OF MEDICALLY UNDERSERVED POPULATIONS

The Senate bill contains a provision, not included in the House
amendment, which requires the standards promulgated as part of the
National Health Planning Guidelines to reflect the unique circum-
stances and needs of medically underserved populations including
isolated rural communities (section 101 (c) ) .

The conference substitute conforms to the Senate bill (section
101(a)).

NATIONAL HEALTH PRIORITIES ; NATIONAL COUNCIL ON HEALTH
PLANNING AND DEVELOPMENT

Purpose of act

The Senate bill contains a provision, not included in the House
amendment, which amends the Congressional findings established in
P.L. 93-641. It states that lack of effective coordination between the
mental health care system and physical health care system, their pro-
viders and planners, have promoted fragmentation, lack of continuity,
and inappropriate utilization of the Nation's health care resources. It
also finds that there has been a lack of attention to and emphasis on
the behavioral aspects of physical health care and status (section 151) .

The conference substitute conforms to the House amendment.

National health priorities

The Senate bill contains a provision which adds to the National
health priorities the promotion of those health services which are pro-
vided in a manner cognizant to the emotional and psychological com-
ponents of the prevention and treatment of illness and the mainte-
nance of health (section 151) .

The House amendment adds to the national health priorities the
following: the discontinuance of duplicative or unneeded services
and facilities, and the adoption of policies that will (a) contain rap-
idly rising costs of health care delivery, (b) insure more appropriate
use of health care services and (c) promote greater efficiency in the
health care delivery system. It also establishes priority for the devel-
opment and use of cost saving technology.

57

The conference substitute, as a compromise, includes the priorities in
the Senate bill and the House amendment (section 102(a)).

NATIONAL COUNCIL MEMBERSHIP SIZE AND REPRESENTATION

The Senate bill contains a provision, not included in the House
amendment, which expands the size of the National Council of Health
Planning and Development from' 15 to 20 members, adds the Assistant
Secretary for Rural Development of the Department of Agriculture as
a non-voting ex-officio member ; and provides that not less than 8 of the
members shall be persons who are not providers of health services in-
cluding individuals who are members of urban and rural medically
underserved populations (section 101(a)).

The Conference substitute conforms to the Senate bill with a modifi-
cation that the Council shall include individuals who represent urban
and rural medically underserved populations (section 102(b)).

Hospital representation on the National Council

The House amendment contains a provision, not included in the
Senate bill, which requires that at least one member of the Council be
an administrator of a private hospital (section 102(b) ).

The Conference substitute conforms to the House amendment by
requiring that at least one member of the Council be a representative
of a hospital (section 102 (b)).

THE ROLE OF COMPETITION IN THE ALLOCATION OF HEALTH SERVICES

Role of competition in health planning

The Senate bill amends the national priorities for health planning
by adding consideration of the strengthening of competitive forces in
the health services industry where competition and consumer choice
can constructively serve to advance the purpose of quality assurance
and cost effectiveness. It adds to the purpose of health systems agen-
cies the preservation and improvement of competition in the health
service area. Review criteria are modified by requiring consideration
of less costly alternatives that are consistent with consumer preferences
and that review criteria pertaining to the relationship of services re-
viewed to the existing health care system take into account the need to
maintain and improve competitive conditions. The Senate bill also
establishes additional criteria for HSA and State agency reviews
pertaining to improvements or innovations in the financing and de-
livery of health services which foster competition and serve to pro-
mote quality assurance and cost effectiveness (section 154).

The House amendment makes Congressional findings that extensive
coverage by health insurance, particularly of inpatient health services,
and the prevailing methods Of - paying for health services through
health insurance have (1) resulted in decisions being made respecting
the use of health services without regard to price, (2) diminished the
effect of market forces on decisions respecting the supply of health
services, and (3) consequently have encouraged duplication and excess
supply of health resources. For health carviees such as institutional
health services, for which market forces do not or will not appro-
priately allocate supply, the house bill would require HSA's and

58

SHPDA's to take actions to allocate the supply of health services.
For health services for which market forces appropriately allocate or
will appropriately allocate supply, HSA's and SHPDA's would be
required to give priority to actions which will strengthen the effect of
market forces. The amendment adds to an USA's purpose the
strengthening of the effects of market forces in cases where they can
appropriately allocate the supply of health services. It also amends
review criteria by requiring that USA's, SHPDA's and SHCC's con-
sider the effect of market forces on supply and demand in their project
review activities.

The conference substitute as a compromise includes findings which
make it clear that for health services, such as inpatient health services
and other institutional health services for which competition does not
or will not appropriately allocate supply consistent with the plans of
health planning agencies, the agencies should perform their functions
to allocate the supply of those services where appropriate to advance
the purposes of quality assurance, cost effectiveness, and access and
the other purposes of title XV. For health services for which compe-
tition appropriately allocates supply consistent with the agency's
plans, the HSA and State agency should in the performance of their
functions give priority (where appropriate to advance the purposes of
quality assurance, cost effectiveness, access and the other purposes of
title XV) to actions which will strengthen the effect of competition on
the supply of those services. The compromise adds to the HSA's pur-
poses, preserving and improving, in accordance with new section 1502
(b), competition in the health service area. Two new review criteria
are also established in section 1532(c). First, in accordance with new
section 1502(b), the agency should consider the factors which affect
the effect of competition on the supply of the health services being
reviewed. Second, the planning agency should consider improvements
or innovations in the financing and delivery of health services which
foster competition in accordance with new section 1502(b), and serve
to promote quality assurance and cost effectiveness.

DESIGNATION OF HEALTH SERVICE AREAS

Area redesignation

Existing law provides that the Secretary shall review on a con-
tinuing basis and at the request of any Governor or designated health
systems agency the appropriateness of the boundaries of established
health service area, and if he determines that the boundary for a health
service area no longer meets the requirements for area designation,
he may revise the boundary.

The requirements provide that :

1. The area shall be a geographic region appropriate for effec-
tive planning and development of health services;

2. To the extent practical, the area shall include at least one
center for the provision of highly specialized health services;

3. The area shall have a population of not less than 500,000 or
more than 3,000,000 except in certain circumstances ;

4. To the maximum extent feasible, the boundaries of the area
shall be appropriately coordinated with the boundaries of prof es-

59

sional standards review organizations, existing regional planning
areas and State planning and administrative areas ;

5. The boundaries shall be established so that the economic or
geographic barriers to receive those services in nonmetropolitan
areas are taken into account ;

6. Boundaries shall be established to recognize differences in
health planning and health services development needs between
metropolitan and nonmetropolitan areas ; and

7. Each standard metropolitan statistical area shall be entirely
within the boundaries of one health service area, except that if the
Governor of each State in which the standard metropolitan
statistical area is located determines, with the approval of the Sec-
retary, that in order to meet the other requirements of the sub-
section, the health service area should contain only a part of the
standard metropolitan statistical area.

The Senate bill directs the Secretary to review on his own initiative
or at the request of any Governor or health system agency (HSA),
the boundaries of a health service area and to redesignate those
boundaries if he finds that they no longer meet the requirements of
section 1511(a) or if the boundaries for the revised health service
area meet the requirements of section 1511(a) in a significantly more
appropriate manner in terms of the efficiency and effectiveness of
health planning efforts. This bill also amends the various consultation
requirements required prior to an area redesignation and requires the
Secretary by January 1, 1980 to establish by regulation criteria for
the revision of health service area boundaries (section 102).

The House amendment provides that the Secretary may redesignate
areas if the Secretary determines the area no longer is the geographic
region appropriate for effective planning and development of health
services and that the proposed revision of the boundaries of the health
services area would establish a region appropriate for effective plan-
ning and development and would meet at least one other of the area
designation requirements (section 104(a)).

The conference substitute conforms to the Senate amendment, how-
ever, area redesignation criteria would have to be published within
one year of enactment (section 104(a)).

The conferees wish to emphasize that a health service area boundary
should be altered only when absolutely necessary and only after the
Secretary balances the cost of redesignation (in terms of disruption
to the health planning process, nonproductive changes in the govern-
ing body membership or erosion of local support for health planning)
against any potential benefits from such redesignation. The conferees
expect that area redesignation will occur only in those circumstances
where there is no doubt that positive benefit will accrue for health
planning in the area.
Entities eligible v/nder section 1536

The House amendment contains a provision, not included in the
Senate bill, which adds the Commonwealth of Puerto Rico to the
States and territories that fall under the provisions of section 1536.
That section that no health service area or health systems agency be
established and permits the State agency to perform the function
of the HSA (section 104 (c) ) .

60

The conference substitute conforms to the House amendment
(section 104(c) ).

Area designation for interstate standard metropolitan statistical areas
The Senate bill contains a provision, not included in the House
amendment, which would change existing law to permit the Governor
of a State, which contains a health service area including part of an
interstate standard metropolitan statistical area to recommend that
the area be broken up in order to meet the other designation criteria
(section 101(b)). Existing law requires that the Governor of each
State in which a standard metropolitan statistical area is located
determine that a split is necessary.

The conference substitute conforms to the House amendment. The
conferees note that one of the most important criteria for the designa-
tion of health service areas is that a standard metropolitan statistical
area not be divided, In any redesignation of health service areas the
conferees expect the Secretary to give considerable weight to this
criteria.

DESIGNATION OF HEALTH SYSTEMS AGENCIES

Governor and SIICC involvement in agency designations

The Senate bill provides that in considering applications for HSA
designations, the Secretary shall give priority to any application
which has been recommended by a Governor or a SHCC for approval
(section 127 (d) and (e)).

The House amendment provides that the Secretary shall give prior-
ity to any application which has been recommended for the approval
by the Governor (section 105).

The conference substitute conforms to the Senate bill (section 105 (a)
and (b».

Consultation with national council on agency termination

The House amendment contains a provision, not included in the
Senate bill, which requires the Secretary to consult with the National
Council on Health Planning and Development prior to terminating
or failing to renew an HSA or State agency designation (section
105(d) and section 122(g)),

The conference substitute conforms to the House amendment (sec-
tion 105 (d) , section 123 (b) ) .

Assistance to entities desiring to become HSA^s

The Senate bill contains a provision, not included in the House
amendment, which requires the Secretary to provide technical assist-
ance to entities desiring to become HSA's (section 125).

The conference substitute conforms to the Senate bill (section
105(f)).

Limits on designated agencies

The Senate bill would allow the Secretary to return an HSA to con-
ditional designation status for one year if the agency's operation and
performance of its functions has not been fulfilled in a satisfactory
manner (section 127).

61

The House amendment provides that if the Secretary determines
that an HSA does not continue to meet requirements of the Act, the
Secretary may renew a designation agreement for such agencies under
such conditions as the Secretary determines appropriate (section

The conference substitute conforms to the Senate bill (section
105(h)).

Periodic review of performance

The Senate bill contains a provision, not included in the House
amendment, which provides that the Secretary shall consider the
comments submitted by any interested person when making reviews
of the performance of health svstems agencies and State agencies (sec-
tion 150).

The conference substitute conforms to the House amendment.

PLANNING GRANTS

Minimum grants

The Senate bill increases the minimum grant which an HSA must
receive to a level of $250,000 for fiscal year 1980; $270,000 for fiscal
year 1981; and $290,000 in any succeeding fiscal year (section 129).

The House amendment provides that an HSA may not receive less
than $200,000 for fiscal year 1980; $215,000 for fiscal year 1981; and
$230,000 in any succeeding year (section 106) .

The conference substitute as a compromise specifies than an HSA
may not receive less than $225,000 in fiscal year 1980 ; $245,000 in fiscal
year 1981; and $265,000 in each succeeding year (section 106).

Funding formula

The House amendment contains a provision, not included in the
Senate bill, which modifies the existing HSA formula to provide that
an HSA receive $.70 per capita for its first million population, $.50 per
capita for its Record million population or part thereof, and $.30 per
capita for any population over two million. However, if the Secretary
determines that the amount provided by the formula is not needed by
the agency, the amount of the grant may be reduced (section 106(a) ).

The conference substitute as a compromise specifies that an HSA
should receive an amount equal to $.60 per capita.

If the formula yields an amount which is not needed by the Agency
to adequately perform its functions, the amount of the grant may be
reduced by the Secretary following a hearing (section 106).

Extraordinary expenses

The Senate bill allows the Secretary to increase the funding levels
of health svstems agencies to recognize any extraordinary expenses
including, but not limited to, expenses resulting from the agency's
health service area being located in more than one State, from the
agency serving a large urban and rural medically underserved popu-
lation or a large health service area and expenses due to the develop-
ment of innovative planning techniques. Up to 5% of the total amount
appropriated could be used for this purpose (section 129).

The House amendment provides that the Secretary may use up to
5 percent of the amount appropriated to assist an agency in meeting
extraordinary expenses including extraordinary expenses resulting

62

from the agency's health service area being located in more than one
State or from the agency's serving a large health service area (section
106(b)).

The conference substitute conforms to the Senate bill (section
106(b)).

In authorizing this discretionary funding of HSA's to meet certain
extraordinary expenses, conferees are cognizant that immediate or
full implementation of this authority could result in some HSA's
initially receiving less funds in fiscal year 1980 than they had in fiscal
year 1979. Full implementation of this authority should be dependent
on the availability of additional HSA funding in fiscal year 1980
which would not necessitate reductions in the per capita funding of
HSA's.

MEMBERSHIP REQUIREMENTS

Labor organizations

The Senate bill clarifies provisions of existing law that major pur-
chasers of health care include, but are not limited to, unions and
corporations (section 110).

The House amendment clarifies that the requirement to include
major purchasers of health care on an HSA governing body includes
labor organizations (section 108(d) ).

The conference substitute conforms to the Senate bill (section
108(d)).

Representation of medical schools

The House amendment contains a provision, not included in the
Senate bill, which adds to the categories of providers in section 1512
(b) (c) (ii) (1) the dean of at least one school of medicine in the area
(section 108(a)(2)).

The conference substitute conforms to the Senate bill (section
108(a)(2)).

M ental health representation

The Senate bill strikes out health care in each place that it occurs
and inserts in lieu thereof health or mental health care in both sections
1512(b)(3)(c) and 1531(3) (section 113(b) ).

The House amendment modifies the HSA governing board member-
ship to include (through consumer and provider members) individuals
who are knowledgeable about mental health services (including serv-
ices for substance abuse) (section 108).

The conference substitute as a compromise includes the House pro-
vision and establishes a reference to health which includes physical
and mental health (section 126) .

In changing the law with respect to mental health representation,
the conferees expect each health systems agency to solicit the active
involvement on their governing board and committees of persons
knowledgeable about mental health services, including services for al-
cohol and drug abuse. This is particularly important given other
changes in the bill which emphasize that mental health goals are to be
included within the health systems plan. Because of the importance of
mental health, drug abuse, and alcoholism issues, the conferees feel
that it is important that at least one provider and one consumer mem-
ber of the HSA board be knowledgeable about these services.

63

Medicine and osteopathy

The Senate bill contains a provision, not included in the House
amendment, which clarifies that the term physician includes both doc-
tors of medicine and osteopathy (section 112) .

The conference substitute conforms to the House amendment al-
though a definition of physician is added to the law (section 126).

Nonprofessional health worker

The Senate bill contains a provision, not included in the House
amendment, which broadens requirements pertaining to an HSA gov-
erning body by adding non-professional health workers to the provider
categories (section 113).

The conference substitute conforms to the House amendment.

Alcohol and drug abuse

The Senate bill contains a provision, not included in the House
amendment, which strikes the word "substance" and inserts in lieu
thereof "alcohol and drug" in section 1512(b)(3) and section 1531
(section 113).

The conference substitute conforms to the Senate bill (section 108).
Direct providers

The House amendment contains a provision, not included in the
Senate bill, which requires that at least one half of the providers shall
be direct providers and at least one of them shall be engaged in the ad-
ministration of hospitals (108(a) (3) ).

The conference substitute conforms to the House amendment (sec-
tion 108).

Broadly represented HSA Board

The House amendment contains a provision, not included in the Sen-
ate bill> that modifies existing law by requiring that the consumer
members of an HSA governing body be broadly representative of the
health service area and include individuals representing the principal
social, economic, linguistic, handicapped, and racial populations in
geographic areas of the health service area and major purchasers of
health care (section 108 (a) ) .

The Conference substitute conforms to the House amendment (sec-
tion 108(a) ) . The conferees emphasize that, the consumer members are
to be "broadly representative" of the health service area. Several dif-
ferent approaches in insuring meaningful involvement in HSA deci-
sions by all segments of society are permissible. However, it was not
the intent of the Congress in enacting this provision to mandate a
quota system requiring the selection of representatives of a particular
category strictly proportionate to its representation in the popula-
tion of the area or to require that representatives of a category be
members of the class they represent. Instead, the Congress intended,
in implementation of this requirement, that health systems agencies
have the flexibility to adopt selection processes most appropriate to
local needs.

The conferees note that there has been some confusion about the
qualifications necessary to be a representative of a specific population.
Such qualifications would ir chide membership in the population
group, or selection by members of the group.

64

The Congress received considerable evidence, which indicated that
the broadly representative requirement for the consumer members of
HSA governing bodies is not being met particularly with regard to
low and moderate income persons. The conferees expect that HEW
will now move rapidly to issue regulations concerning this and other
governing body requirements in this legislation.

Local elected official participation

The Senate bill requires that HSA's must include public elected
officials and other representatives of units of general purpose local
government on their governing bodies. In the latter case individuals
would have to be appointed by a unit of general purpose government
or a combination thereof. In a case of a single State health service area,
the State government of the State would be deemed a unit of general
purpose local government for the purposes of this provision (section
107(b)).

The House amendment clarifies the requirement that public elected
officials and other representatives of general purpose local govern-
ment are required to be included in the membership of the health sys-
tems agency governing body (section 108 (b) ) .

The conference substitute conforms to the Senate bill (section U08
(b)).

Definition of provider of health care

The Senate bill modifies the definition of provider of health care
by providing that an individual shall not be considered an indirect
provider of health care solely because he is a member of a governing
body of an entity engaged in the provision of health care or in re-
search or in instruction or engaged in producing drugs or other articles.
The Senate bill also strikes the word "substance'" and inserts in lieu
thereof "alcohol and drug" (section 141).

The House amendment revises the definition of provider of health
care by deleting the notion of indirect provider. Deleted from the ex-
isting definition of provider are the following : (1) board members of
voluntary health organizations who do not have as their primary pur-
pose the delivery of health care, the conduct of research or the conduct
of health professional instruction; and (2) the immediate family of
a provider with the exception of the provider's spouse. The income test
for a provider is changed from one-tenth to one-third (section 108).

The substitute as a compromise includes the Senate and House
provisions with the exception of the deletion of the immediate family
of a provider from the definition of a provider, and a change in the
income test for a provider from one-tenth to one-fifth (section 108 (d) ) .

Waiting period for providers

The Senate bill contains a provision to remove the stipulation that
consumers on HSA boards cannot have been providers of health care
within the 12 months preceding the appointment (section 110).

The House amendment includes a similar provision although it
applies only to indirect providers (section 108 (d) ) .

The conference substitute conforms to the Senate bill (section
108(d)).

65

Veterans^ Administration participation

The Senate bill clarifies that "ex officio'' means non-voting when re-
ferring to the ex officio members of a health systems agency governing
body (section 114(b)).

The House amendment provides that the representative of the Vet-
erans' Administration shall not be included in determining the
numerical limits of an HSA, i.e., an HSA required to have a VA repre-
sentative can have a 31 member governing body (section 108(b) (3) ).

The conference substitute as a compromise contains both the provi-
sions of the Senate bill and the House amendment (section 108 (b)(3)).

Consumer majority on committees

The Senate bill provides that a majority of the members of any HSA
subcommittee or group must be consumers of health or mental health
care (section 115). It also deletes the requirement that all committees
meet the other representational requirements and deletes the phrase "of
its members".

The House amendment provides that appointments will be made to
HSA subcommittees and groups in such a matter that a majority of
their members shall be consumers of health care (section 108(e) ).

The conference substitute as a compromise conforms to the House
amendment and includes the Senate provision which makes it clear
that other than governing body members can serve on the HSA's com-
mittees (section 108 (e) ) .

GOVERNING BODY SELECTION

The Senate bill sets forth guidelines for the process to be used by
the HSA in selecting members of its governing body and subarea coun-
cils. That selection process should assure that members are selected in
accordance with the compositional requirements of the Act, that there
is opportunity for broad participation by the residents of the health
service area, that such participation will be encouraged and facilitated,
and that HSA governing body members do not select other members of
the governing body. The selection process is to be made public and re-
ported to the Secretary (section 106) .

The House amendment contains a similiar provision except that any
required change in the selection process would have to be made only to
the extent permitted by the State law applicable to the incorporation of
the agency and the existing members would not be prohibited from
selecting new members of the governing body (section 109) .

The conference substitute requires that one-half of the members of
the governing body be selected by other than the existing members of
the governing body. It also provides that, if the subarea council is au-
thorized to select or selects one or more members of the governing
body of the health systems agency, then one-half of the members of
the subarea council must be selected by other than the existing members
of the subarea council (section 109).

The conferees express particular concern about testimony concern-
ing the process through which consumer and provider representatives
are selected to HSA governing bodies. The present law allows an HSA

66

governing body to be self -selected. The conferees are concerned as a
result these agencies, which are supposed to be open and accessible can
become closed with a self -perpetuating board providing policy direc-
tion unsupported by the general public. The conferees view such a
prospect with concern and have thus adopted this provision which will
prohibit self -perpetuation.

RESPONSIBILITIES OF GOVERNING BODIES

Public HSA responsibilities

The Senate bill provides that an HSA that is a public regional
planning body or a unit of local government shall not be required to
delegate to the separate governing body for health planning the
exclusive authority to appoint and with cause remove members of the
governing body for health planning, establish personnel rules and
practices for staff or approve the agency's budget or any combination
of these activities (section 107(a) ).

The House amendment provides that when a health systems agency
is a public regional planning body or a unit of local government, the
public board shall be responsible for the establishment of personnel
rules and practices for the staff of the agency and for the agency's
budget unless the governing body for health planning is specifically
authorized to perform these functions. It also provides for the public
board to appoint the members of the separate governing body for
health planning. The House amendment in addition specifies that
when an HSA elects to have a governing body of more than 30 mem-
bers and establishes an executive committee that has authority to take
action for the board, then the executive committee shall be composed
of not less than 10 members, or more than 30 members. Existing law
limits the committee to 25 members (section 110(a) and (b)).

The conference substitute conforms to the House amendment (sec-
tion 110(a) and (b)).

Liability

The Senate bill amends existing law to revise and broaden the scope
of protection against personal liability for money damages and to
provide protection for consultants and agents of the HSA, as well
as members and employees. The bill provides that no such individual
will be considered liable if the individual believed he or she was
acting within the scope of official duties and acted without gross
negligence or malice toward any person affected by it. The Senate bill
also extends the same protection against personal liability suits to
SHCC members, employees, consultants, and agents (section 116).

The House amendment clarifies the immunity from liability for
money damages for HSA board members and employees and extends
the immunity to the HSA. An exception to this immunity is estab-
lished for civil actions for bodily injury to individuals or physical
damage to property (section 110(d) ).

The conference substitute includes both the Senate bill and the
House amendment although the Senate provision extending immu-
nity to consultant or agents for HSAs or SHCCs is not included
(section 110(d)).

67

Plan development in a public HS A

The House amendment contains a provision, not included in the
Senate bill that provides that in the case of a health systems agency
such as a public regional planning body or a unit of general local gov-
ernment, the planning body or unit of government shall only be given
a reasonable opportunity to comment on the health systems plan and
annual implementation plan proposed by the governing body and to
propose additions to and other revisions in it. It further provides that
any such proposed additions or revisions not included in the plan by
the agency shall be appended to the plan. This provision would not
a feet the authority over the plan of the four existing HSA's which
are units of local government (section 115(g) ).

The conference substitute conforms 10 the House amendment which
would allow four existing HSA's which are units of local government
(those serving Montgomery County, the City of Chicago. Santa Clara
County, and the Xavajo Xation) to review and approve the health
systems plan and the annual implementation plan. All other public
HSA's would be given a reasonable opportunity to comment on the
health systems plan and annual implementation plan proposed by the
separate governing body for health planning and to propose additions
to and other revisions in it. The separate governing body for health
planning of all public health systems agencies including the four
HSAs (designated above) which are units of local government, shall
have exclusive authority to perform all the other functions described
in section 1513 (section 110 (e) ) .

Prohibition against lobbying

The House amendment contains a provision which provides that
none of the funds authorized under Titles XV and XVI shall be
directly or indirectly used to pay for the personal services of indi-
viduals intended to influence executive orders or legislation (section
110).

The conference substitute as a compromise provides that no funds
may be used by health systems agencies directly to pay any individual
to influence executive orders or regulations or legislation. The pro-
hibition however, does not apply with respect to compensation paid
by a health systems agency to an employee of the agency unless the
primary responsibility of the employee is to influence such govern-
mental action (section 110(f)),

This provision was adopted to prohibit an HSA from hiring or
contracting with an individual to lobby. The conferees, however, rec-
ognize that HSA staff and board members have a right to represent
their agency's view before both executive and legislative branches.
This amendment is not intended to in any way to alter that right.

The conferees also wish to make it clear that the substitute does not
prohibit an HSA from joining a tax-exempt organization, such as the
American Health Planning Association, which might lobby consistent
with its tax-exempt status.

The conferees note that the purpose of this substitute is fo permit
the effect of the decision in Montgomery County. Md. v. Calif ano. 499
F. Supp. 1230 (1978) to continue only with regard to review and ap-
proval of the health systems plan and annual implementation plan by

68

the four existing HSA's (designated above) which are units of local
government.

MEETINGS AND RECORDS

The Senate bill would amend existing law to exclude from the open
meeting requirement meetings or portions of meetings called to discuss
the performance or remuneration of an HSA employee which, if
public, would constitute a clearly unwarranted invasion of personal
privacy of such individual. The bill extends similar scope of protec-
tion to HSA and State personnel records and data including restric-
tions on the Secretary's access to such records and data (section 109).

The House bill amends existing law to provide that the health sys-
tems agency is not required to conduct in public those portions of busi-
ness meetings that deal with information of a personal nature the
disclosure of which would constitute a clearly unwarranted invasion
of personal privacy or, information relating to the agency's participa-
tion in a judicial proceeding. Similar provisions would apply to the
agency's data and records. The House amendment provides that the
State agency is to conduct its business meetings in public and make
records and data available in accordance with State law. Similar
provisions to insure openness in the health planning process are added
in regard to an agency's executive committee (section 111) .

The conference substitute as a compromise provides that HSA's
and State agencies are to hold their meetings in public, except that
any part of a meeting may be closed if the governing body or State
agency determines that information respecting the performance or
remuneration of an employee of the agency will be disclosed and such
disclosure would constitute a clearly unwarranted invasion of personal
privacy of that employee, or that information relating to an agency's
participation in a judicial proceeding would be disclosed. Similarly,
HSA's and State agencies would be required to make available, upon
request, to the public all their records and data except for personnel
and medical files the disclosure of which would constitute a clearly un-
warranted invasion of personal privacy, and records or data relating
to their participation in a judicial proceeding (section 111).

SUPPORT AND REIMBURSEMENT FOR MEMBERS OF GOVERNING BODIES

Support for governing body members

The House amendment contains a provision, not included in the
Senate bill, which requires that each health systems agency have an
identifiable program to provide assistance to the members of its gov-
erning body and committees including a means to define the support
needs of the members and to provide the members with the support,
training, and continuing education which is needed (section 112(a)).

The conference substitute conforms to the House amendment (sec-
tion 112(a)).

Reimbursement for members, of governing bodies

The Senate bill modifies existing law to allow HSA's when appro-
priate to make advances to HSA members for their reasonable costs
incurred in attending meetings and performing other needed func-
tions of the health systems agency (section 108) .

69

The House amendment provides that the HSA, where appropriate,
can make advances to the Board members for the reasonable costs in-
curred in attending meetings in the governing bodies (section 112 (b) ) .

The conference substitute conforms to the Senate bill (section
112(b)).

Governing body staff support

The Senate bill provides that at least one member of the staff should
be designated as having the responsibility to provide the consumer
members of the governing body with such assistance as they may
require to effectively perform their functions (section 105(c)).

The House amendment has a similar provision although the desig-
nated staff member would be responsible for providing assistance to
both consumer and provider members of the governing body (section
112(c)). \

The conference substitute conforms to the House amendment except
that it provides that the staff assistance is particularly for the con-
sumer members (section 112(c)).

The conferees have adopted this addition to the House amendment
because consumers generally have less familiarity with health care
issues and medical practices than provider members of the board and
thus in many instances may require special staff assistance.

CONFLICTS OF INTEREST

The Senate bill provides that each health systems agency and State-
wide health coordinating council (SHCC) shall adopt procedures
to insure that no member, employee, consultant or agent participates
in any matter regarding any person, institution, organization or other
entity with which he or she has had in the past three years substan-
tial direct or indirect employment, fiduciary, competitive, medical
staff, or ownership or financial interest (section 104 (a) and (b)).

The House amendment provides that no member of the governing
body or its subunits may vote on project reviews regarding an indi-
vidual or entity with which such member has any substantial owner-
ship, employment, fiduciary, contractual, creditor, or consultative
relationship. It also requires adequate disclosure of any such conflict of
interest in relationship to any matter before the HSA. Similar require-
ments are added for members of the Statewide health coordinating
council (section 113 (a) and (b) ).

The conference substitute as a compromise conforms to the House
amendment with the addition of medical staff relationships and a one
year period during which a member may not have had a conflict of
interest (section 113).

STAFF EXPERTISE

The ^enate bill requires HSA staff to have expertise in financial and
economic analysis, public health and disease prevention, mental health
planning and development, and the use of mental health resources. It
further provides that to the extent practical HSA's must have staff
meeting these and other requirements. It also clarifies that the func-
tions of planning and of development of health resources include
mental health resources (section 105 (a) and (b)).

70

The House amendment adds expertise in both financial and economic
analysis and the prevention of disease and other public health matters
to the list of expertise which should be present, to the extent feasible,
in a health systems agency staff (section 114) .

The conference substitute as a compromise adds expertise in both
financial and economic analysis, the prevention of disease and other
public health matters to the list of expertise that must be present on
the health systems agency staff. It also clarifies that expertise in health
planning includes mental health planning just as references to health
resources include mental health resources (section 114).

HEALTH PLAN REQUIREMENTS

Health plan format

The Senate bill provides that the SHCC shall establish (in consul-
tation with the HSA's within the State and the State Agency) a uni-
form format for health systems plan and annual implementation plans.
It also requires the HSA to develop its plan in accordance with the
format prescribed (section 138).

The House amendment provides that the SHCC shall establish a
uniform format for health systems plans and require that the HSA
develop its plan in accordance with that format (section 115(a) and

(b))- . . .

The conference substitute conforms to the Senate bill (section
115(a)).

Planning agencies involvement in environmental health issues

Both the Senate bill and the House amendment contain a provision
which provides that a health systems plan's goals relating to the de-
scription of a healthful environment are to be concerned "primarily
with regard to health care equipment, and health services provided by
health care institutions, health care facilities, and other providers of
health care and health resources" (section 115 (b) ) .

It is the intent in adding this provision to encourage health systems
agencies to focus their energies on issues directly relating to health
planning and resources development.

The conferees intend, however, that this provision not prevent an
HSA from involving itself in improving the environment which im-
pacts on health. In fact, the conferees expect that this bill will expand
and enhance the role of disease prevention activities (particularly in-
volvement in environmental, occupational, nutritional health pro-
grams) in the health planning and implementation process. It is ex-
pected tht HSA's and State health planning agencies will focus greater
attention, personnel, and resources on identifying and correcting pre-
ventable diseases and conditions. Too little effort has been directed at
disease prevention under health planning legislation in the past.

At the same time, the conferees recognize that in many areas envi-
ronmental, occupational, nutritional health programs are presently in
existence. In such cases, it is not the conferees intent to require dupli-
cation of effort by health planning agencies. Health planning agencies
should be actively involved in identifying problems and unmet needs
in existing disease prevention programs. The planning agency should
identify the consequences to the health of its areas citizens and the im-

71

pact on rising costs of the failure to address adequately environmental
health problems. It should serve as a catalyst for action to improve
public health in such circumstances.

Mental health and the HSP

The Senate bill requires the health systems plan to include an
identifiable alcohol abuse, drug abuse and mental health component
and to address specifically the needs of all medically underserved
populations in the health service area (section 119(c)).

The House amendment requires that the HSP include goals for the
delivery of mental health services in its health service area which
goals shall be developed under a procedure through which persons
knowledgeable about such services will be consulted (section 115(b) ).

The conference substitute conforms to the House amendment (sec-
tion 115(b)).

The conferees expect that the goals and related resources require-
ments for mental health and drug abuse and alcoholism services will
be integrated into the health systems plan by an HSA. While an
HSA may desire to have separate sections of the plan dealing with
these issues, it is not required to do so. The conferees realize that the
manner in which the health goals are included in the plan will vary
from agency to agency and will depend in large part on the taxonomy
with which an HSA is viewing the health system and in turn develop-
ing its plan.

Statewide health needs

The House amendment contains a provision not included in the
Senate bill, which requires the State health planning and develop-
ment agency to determine the health needs of the State which are
statewide and requires the health systems plan to be developed in a
way which is responsive to those statewide health needs. In determin-
ing statewide health needs, recommendations are to be sought from
the State health authority, State mental health authority and other
agencies in State government and the Statewide Health Coordinating
Council (section 115(c)).

The conference substitute conforms to the House amendment (sec-
tion 115(c)).

Coordination of health and mental health planning .

The Senate bill requires that the preliminary State health plan in-
clude an identifiable alcohol abuse, drug abuse and mental health
component to be prepared by the respective alcoholism drug abuse and
mental health authorities designated by the Governor.

The alcohol abuse, drug: abuse and mental health components of the
HSP's submitted by the HSA*s for inclusion in the State Health Plan
may, if found necessary by the respective State authorities, contain
revisions of such components to achieve their appropriate coordina-
tion or to deal more effectively with Statewide alcohol abuse, drug
abuse, and mental health needs. The remainder of such preliminary
State plan, may, if found necessary by the State Agency, also contain
revisions of such HSP's to achieve their appropriate coordination or
to deal more effectively with Statewide health needs. The preliminary
State plan is submitted to the SHCC for approval or disapproval and
for use in developing the final State health plan (section 135(b) ).

72

The House amendment requires the State Agency to refer the
HSP's to the State health authority, the State mental health authority
and other agencies of State government designated by the Governor
to review the goals and related resource requirements of the HSP's
and to make written recommendations to the State Agency respecting
such goals and requirements. If the State Agency does not take one of
the actions proposed in a recommendation submitted under this pro-
cedure, the State Agency will make available to the public a written
statement of its reasons for taking such action. In reviewing these
portions of the State health plan, the SHCC may establish a procedure
under which persons knowledgeable about mental health services will
have an opportunity to make recommendations to the SHCC. The
State health authority, the State mental health authority and other
agencies of State government are required to carry out those parts of
the State health plan which relate to State government (section
115(c)).

The conference substitute conforms to the House amendment (sec-
tion 115(c)).

The Senate bill requires the coordination of the State health plan
with the State mental health plan, the State alcohol abuse plan and
the State drug abuse plan (section 118(d) ).

The House amendment requires the plan required by section 303(a)
of the Comprehensive Alcohol Abuse and Alcoholism Prevention,
Treatment and Eehabilitation Act of 1970 and the plan required by
section 409(e) of the Drug Abuse Office and Treatment Act of 1972
to be consistent with the State health plan in effect for such State. It
also makes changes in the Community Mental Health Centers Act to
assure consistency between the two planning processes (section 115 (j)
and (k)).

The conference substitute as a compromise requires that the mental
health, drug abuse and alcoholism plans be consistent with the State
health plan (section 115(j) ).

The conferees have adopted provisions contained in both bills which
seek to integrate mental health, alcohol and drug abuse planning into
the general areawide and state health planning process. The act
requires that state programs must provide for consultation and coor-
dination with the appropriate responsible state agency for these health
services. Moreover, the laws governing mental health, alcohol and
drug abuse activities have been amended to require that each respec-
tive state plan be consistent with the state health plan under this act.

The conferees were unable to avoid the development of dual state
health plans required by existing law. However, it is expected that
every effort will be made by the Secretary to eliminate overlap and
duplication between the state plans and to reduce the requirements
imposed by regulations on those organizations seeking Federal sup-
port in these areas. The conferees expect that efforts will be under-
taken to allow the mental health, alcohol and drug abuse plans to be
completely incorporated into the SHP. In the meantime it is expected
that the State health plan be the policy plan for all health services in
the State and that each of the categorical plans set forth programs
for State health plan implementation for their respective areas oi
responsibility.

73

Health systems plan and State healtJi plan requirements

The Senate bill sets forth specific material to be included in health
plans. In addition to the other requirements, the HSP and the State
health plan must include a description of the institutional health
services needed for the well being of persons receiving care within the
health service area, including at a minimum, the number of type and
medical facilities, rehabilitation facilities, nursing homes, beds and
equipment needed to provide acute inpatient, psychiatric inpatient,
obstetrical inpatient, neonatal inpatient, long-term care, and treatment
for alcohol and drug abuse; the extent to which existing medical
facilities, rehabilitation facilities, nursing homes, beds and equipment
are in need of modernization or conversion to new uses; and, the extent
to which new medical facilities, rehabilitation facilities, nursing homes,
beds and equipment need to be constructed or acquired. Similar infor-
mation would have to be provided on other non-institutional health
services including the number and type of health maintenance orga-
nizations, outpatient facilities, rehabilitation facilities, facilities for
treatment of alcohol and drug abuse and other medical facilities, and
home health agencies and equipment needed to provide public health
services and outpatient care (section 118(a) and (d) ).

The House amendment requires that the health systems plan include
a statement of the resources — personnel, facilities, and other re-
sources— which the agency determines are needed to meet the goals set
forth in the health systems plan. The HSA may identify in such state-
ment any health care facility which provides inpatient health services
which should undertake such changes (section 115 (b) ) .

The conference substitute as a compromise provides that both the
health systems plan and the State health plan shall describe the in-
stitutional health services needed in the area including at a minimum,
acute inpatient, rehabilitation and long-term care services and other
health services needed to provide for the well being of persons re-
ceiving care within the health service area including at a minimum
preventive, ambulatory, and home health services. The health systems
plan shall also describe the number and type of resources, including
facilities, personnel, major medical equipment, and other resources
required to meet the goals of the health systems plan and shall state
the extent to which existing health care facilities need modernization,
conversion to other uses, or closure and the extent to which new health
care facilities need to be constructed or acquired (section 115(d)).

The conferees note that in adopting this provision it is their desire
that plans developed at the areawide and State level become more spe-
cific in order to improve their usefulness as a regional or state-wide
guide for the development of new, or modification of existing, health
care services. In doing so the planning agency is expected as appro-
priate to identify the health care facilities, organizations, or indi-
viduals, which should undertake the proposed changes set forth in the
plan.

Health plan procedures

The Senate bill adds a public hearing requirement for the establish-
ment, review, and amendment of the annual implementation plan as
well as the HSP (section 119 (b) ) .

74

The House amendment requires the annual implementation plan to
include a statement of the resources needed to meet the objectives of
the AIP. It also requires that the HSA assure that the public has
adequate input into the development and revision of the AIP. It also
provides that if an HSA is a public regional planning body or unit of
general local government, the public board shall have an opportunity
to review and comment on the AIP (section 115 (e) ) .

The conference substitute combines the Senate and House ap-
proaches (section 115(e)).

The conferees note that the requirement for notification and a public
hearing by an HSA regarding revisions in its AIP or HSP is in-
tended to give interested persons an opportunity to present their views
on the proposed plan or proposed changes in existing plans which are
substantive in nature. It is not intended that public hearings be held
for every conforming, editorial, or other minor change in an existing
plan.

Plan and the national guidelines

The Senate bill deletes the requirements of existing law that the
goals in the health systems plan are to be consistent with the national
guidelines for health planning. The HSA shall submit to the SHPDA,
SHCC and the Secretary a detailed statement of the reasons for any
inconsistencies between the HSP and the AIP and the national guide-
lines and priorities (section 119 (d) and (e) ).

The House amendment deletes the requirement in section 1513 (b) (2)
that the goals of the SHP are to be consistent with the national guide-
lines for health planning. This makes it clear that the HSA can estab-
lish goals that are different from the national guidelines in order to be
responsive to the unique needs and resources in its area. It also requires
that if the goals contained in the HSP are not consistent with the na-
tional guidelines, the HSA shall provide the SHPDA and the SHCC
with a detailed statement for the reasons for the inconsistency (sec-
tion 115(g) ).

The conference substitute conforms to the House amendment with
the Senate bill's reporting requirement (section 115 (f) ) .

Governors' involvement in the State health plan

The Senate bill requires that the State health plan prepared by the
SHCC have the concurrence of the Governor (section 118(c)).

The House amendment provides that the State health plan ap-
proved by the SHCC shall be the State health plan for the State unless
within 60 days after its approval, the Governor disapproves the plan
because it does, not effectively meet the established statewide health
needs. In doing so, the Governor shall make a detailed statement on
the basis for his determination that the plan does not meet statewide
health needs and shall specify the changes in the plan which are needed
(section 1,15 (h) ).

The conference substitute as a compromise specifies that the State
health plan, as approved by the SHCC, shall be the State health plan
only with the approval of the Governor. The State health plan may
be disapproved by the Governor only if the Governor determines that
the plan does not effectively meet statewide health needs. In disap-
proving the plan, the Governor shall make public a detailed statement
of the basis for his determination that the plan does not meet statewide

75

health needs and shall specify the changes in the plan which are
needed (section 115 (g) ) .

Plan as a condition of a grant

The Senate bill contains a provision, not included in the House
amendment, which stipulates that until a State health plan is in effect,
the Secretary may not make any grants to the State health planning
and development agency pursuant to section 1525 (section 118(e)).

The conference substitute conforms to the Senate bill (section 115

(g) )-

Technical assistance by HSA's

The Senate bill contains a provision, not included in the House
amendment, which requires the HSA to provide technical assistance
in obtaining and filling out necessary forms to applicants applying
for projects to achieve the HSP (section 1J20) .

The conference substitute conforms to the Senate bill (section 115

(h) ). The conferees note that this requirement is added so that the
health systems agency will include in the technical assistance it pro-
vides guidance to applicants and others in completing the agency's
forms and in meeting the necessary application requirements for a
certificate of need. It should be clear that the HSA is not expected
to complete the forms and applications but merely to assist the appli-
cant in meeting the application requirements.

Planning cycle

The Senate bill requires that plans be reviewed at least every three
years (sections 119(a), 120(b), 136(c)).

The House amendment provides that plans be reviewed on a biennial
basis (section 115 (i) ) .

The conference substitute conforms to the Senate bill (section 115

(i) )-

The conferees in accepting the Senate provision that HSA's and
SHCC's be required to review the complete health systems plans every
third year believe that this will reduce or eliminate paperwork and
duplication of effort currently caused by annual reviews and allow
more time to be spent on plan implementation. Nevertheless, it is ex-
pected that those agencies which have not fully developed their plans
or those agencies whose plans do not address the full scope of covered
services or institutions in their areas will continue to review and revise
their plans on a more frequent basis until such time as the plans are
complete. All HSA's are encouraged to update or modify their plans as
necessary.

HSA's and Indian tribes and organizations

The Senate bill adds a new requirement for HSA's having an Indian
tribe or intertribal Indian organization located within its health serv-
ice area. The HSA is directed to carry out its functions in a manner
that recognizes tribal self-determination and is to seek to enter into
agreements with the tribes or organizations on matters of mutual con-
cern as defined in the regulations of the Secretary (section 153).

The House amendment adds a new provision to clarify that the
development of a health systems plan or annual implementation plan
in an area that includes an area under the jurisdiction of an Indian

76

tribe or an Alaskan Native Village does not affect the authority of the
tribe or village to establish and carry out the health plan for the Indian
health programs under its jurisdiction. If a health plan for Indian
health programs is developed, the HSA shall include such plan in the
HSP. The House amendment also provides for the sharing of data
between the HSA and Indian tribes and Alaskan Native villages (sec-
tion 115 (f ) and section 121) .

The conference substitute conforms to the Senate bill and adds a
provision related to the sharing of HSA data with Indian tribes and
Alaskan Native Villages (section 121 (b) ) .

CRITERIA AND PROCEDURES FOR REVIEWS

Review of criteria and procedures

The House amendment contains a provision, not included in the
Senate bill, which requires that in the conduct of reviews of plans or
applications for Federal funds, the SHCC shall, to the extent appro-
priate, use the procedures and criteria that apply to other reviews un-
der Title XV listed in section 1532. It also provides that in the conduct
of reviews the agencies shall consider the relationship of the health
services being reviewed to the applicable State health plan in addition
to the relationship to the relevant HSP and AIP (section 116).

The conference substitute conforms to the House amendment (sec-
tion 116(a)).

Failure to complete review

The Senate bill contains a provision which provides that the f ailure
of a health systems agency or a State agency to complete a review with-
in the period prescribed for the review may not be deemed by the
agency to constitute a negative finding, recommendation, or decision.

The House bill provides that certificate of need review shall be com-
pleted within 90 days or such additional time on which the applicant
and the agency can agree; or such additional time as prescribed in
State law in cases in which a request is made to the State agency for a
hearing under section 1532 (b) (8) or the State batches applications ; or
when the applicant has been cited by the Secretary of HEW for a vio-
lation of the Civil Eights Act of 1964 (section 116 (b) ) .

The conference substitute as a compromise requires the State agency
to establish a period within which approval or disapproval of the ap-
plication for a certificate of need shall be made. If a State agency fails
to approve or disapprove an application within the applicable time
period the applicant may bring an action in an appropriate State court
to require the State agency to approve or disapprove the application
(section 116(d)).

The conferees wish to point out that this provision requires each
State to set a time certain for the completion of a certificate of need
review. The conferees emphasize, that, while the period of review may
vary according to the type of application or the relevant review pro-
cedures ; it is important that the applicant know at the beginning of
a review the length of such review period and have a right of action
against the State agency if a decision is not made within that period
of time. The conferees are particularly concerned with the practice of
some States in the past in which their failure to make a decision has
meant automatic disapproval of the application. The conference sub-

77

stitute is designed to prohibit this practice. The conferees expect each
State agency to make decisions within the time period which is set
forth and would expect the Secretary of HEW to carefully monitor a
State's performance with regard to this requirement and take what-
ever actions are necessary to assure that it is met.

Judicial review

The Senate bill contains a provision, not included in the House
amendment, to provide for judicial review of any final decisions
rendered by a State agency in regards to a certificate of need review
or appropriateness review. Any person adversely affected by such
decision may within a reasonable period of time after such a decision
is made and any further administrative remedies are exhausted obtain
judicial review of such a decision in an appropriate State court. Upon
such judicial review, the decision of the State agency shall be affirmed
unless it is arbitrary or capricious or was not made in conformity with
the applicable law (section 133) .

The conference substitute conforms to the Senate bill except that it
requires judicial review to be limited to certificate of need decisions
made by a State agency, and to other reviews, where appropriate (sec-
tion 116(d)).

Judicial review has not been required for appropriateness review
because the Act does not authorize the use of appropriateness review
to require a health care institution to terminate services or to close its
facility. However, the conferees intend that, any review of the appro-
priateness of services which could result in a health care institution
being unable to provide a service or having to close in total or in part
its facility or the imposition of any other sanctions as a result of the
review, shall be subject to the judicial review requirements agreed to
by the conferees.

Administrative review

The House amendment contains a provision, not included in the
Senate bill, that requires that each decision of the State agency not
to issue a certificate of need shall upon request of the person who ap-
plied for the certificate be reviewed under an appeals mechanism which
is consistent with the State law governing the practices and procedures
of administrative agencies or, if there is no such law, by an entity
designated by the Governor (section 117 (a) ) .

The conference substitute conforms to the House amendment and
provides that any person directly affected by such decision may re-
quest a review (section 116(d) ).

Notification

The Senate bill contains a provision, not included in the House
amendment, which requires timely written notification to all affected
parties at the beginning of a review and requires that all persons who
have asked to be placed on a mailing list maintained by the HSA or
State Agency be notified of certain reviews by such agencies. It also
provides for timely notification of providers of health services and
other persons of certain information. It requires that public hearings
be held prior to any decision made in the course of HSA or State
Agency review as requested by persons directly affected by the review
(section 145, 146, and 147) .

78

The conference substitute conforms to the Senate bill (section
116(d)).

Procedures for review

The Senate bill contains a provision, not included in the House
amendment, which establishes requirements for HSA and State
Agency reviews of certificate of need applications and reviews of the
appropriateness of existing institutional health services, and where
appropriate, for other reviews. The requirements are that each par-
ticipant may present evidence and arguments orally or by written
submission, each participant may cross examine any other participant
who makes a factual allegation relative to such review, a hearing rec-
ord must be maintained, HSA and State Agency decisions must be
based solely on the hearing record, and there is a prohibition on ex
parte contacts with individuals voting in the review process (section
144(c)).

The conference substitute requires a formal hearing before the
State Agency if requested, requires the decision to be made on the
record, sets forth an administrative review mechanism, provides that
any person adversely affected by a final decision of a State Agency
may obtain judicial review and that there shall be no ex parte contact
between the applicant and any person in the State Agency with re-
sponsibility respecting the application after the commencement of a
hearing on the application (section 116(d)).

The conferees intend that a formal hearing be held if the State
Agency is requested to do so. If an HSA has been delegated this hear-
ing responsibility by the State only one formal hearing is required.
If an HSA has not been delegated this hearing responsibility then, if
requested, the HSA may also hold a hearing which may be either for-
mal or informal at the HSA's discretion (section 116(d)).

Criteria for review

The Senate bill provides that in reviewing construction projects the
HSA and the State Agency shall consider effect of the application on
the costs and charges to the public of providing health services by
other persons ; that in the case of existing services the quality of care
provided by such facility in the past must be considered, and that in
both cases consideration must be given to the extent to which such pro-
posed services will be accessible to all residents of the area to be served
by such services (section 148).

The House amendment requires that in adopting criteria the plan-
ning agency shall consider, in the case of health services proposed to
be provided, the effect of their proposed services on the clinical need
of health professional training programs, the extent to which such
programs will have access to those services if they are to be available
in a limited number of facilities and the extent to which such services
will be accessible to all residents of the area to be served by the services.
It also requires that in the case of health services or facilities proposed
to be provided, the efficiency and appropriateness of the use of exist-
ing services and facilities similar to those provided be considered in
the review process (section 116 (d) ) .

The conference substitute as a compromise contains provisions of
both the Senate bill and the House amendment (section 116(f) and
(g)).

79

A dditional procedures

The Senate bill amends section 1532(a) to stipulate that procedures
and criteria for review by HSA's and State Agencies must provide
that applications be submitted in accordance with established time-
tables, reviews be undertaken in a timely fashion, appplications of
similar types of services and facilities be considered in relation to
each other no less often than twice a year, and reviews of similar types
of institutional health services affec- ing the same service area must be
considered in relationship to each other. It, also provides that HSA's
and State Agencies must cooperate in the development of procedures
and criteria to the extent appropriate to the achievement of efficiency
in their review and consistency in criteria for such reviews (section
143).

The House amendment provides that reviews may be conducted in a
manner that batching of applications can occur with comparisons
being made among applications. It also requires the HSA, the
SHPDA and the SHCC to work together in developing criteria and
procedures for review (sections 116(c) and 117(a)).

The conference substitute conforms to the Senate bill (section
116(e)).

Requests for information

The House amendment contains a provision, not contained in the
Senate bill, which requires health planning agencies to develop pro-
cedures that assure that requests for information are limited to only
that information which is necessary to perform reviews. It also allows
an applicant to designate data which he believes should not be released
to the public and to submit such data separately. If the agency pro-
poses to release such data, it shall notify the applicant at least 30 days
before the release. The House amendment would also provide that the
agency's procedures assure that the general public have access to all
written materials "essential" rather than "pertinent" to a review
(section 116(g)).

The conference substitute requires the agencies to give the appli-
cant 15 days to provide any data requested after a review has begun.

Review of procedures

The House amendment contains a provision, not included in the
Senate bill, which requires the Secretary to annually review the reg-
ulations promulgated pursuant to section 1532 relating to procedures
and criteria and to allow the health planning agencies opportunity to
comment on the need for the revision of the regulations. These agencies
shall be consulted at least 45 days before initial publication (section
116(f)).

The conference substitute conforms to the House amendment (sec-
tion 116(h)).

CERTIFICATE OF NEED PROGRAMS

State health plan and certificate of need

The Senate bill requires that certificate of need decisions be con-
sistent with the State health plan except in emergency circumstances
that pose a threat to public health (section 118(b)).

80

The House amendment provides that a decision to issue a certificate
of need shall not be inconsistent with the State health plan (section
117(a)).

The conference substitute conforms to the Senate bill (section 117
(a)).

Sanctions and withdrawal

The Senate bill contains provisions, not included in the House
amendment, which require a certificate of need program to be con-
sistent with standards established by the Secretary. It also provides
that such a program shall provide for procedures and penalties to en-
force the provisions of the program and that after a certificate of need
is issued a periodic review (at least every 24 months) shall be con-
ducted of the progress being made in making the service or facility for
which the certificate was issued available for use. The program shall,
provide for withdrawal of the certificate if there has not been sub-
stantial progress (section 136).

The House amendment provides that after a certificate of need is
issued an annual review shall be conducted of the progress being made
and if adequate progress is not being made, the certificate shall be
withdrawn (section 117(a)).

The conference substitute combines the two provisions (section 117
(a) and (b)).

General provisions

The House amendment contains an amendment not included in the
Senate bill, which clarifies and expands required certificate of need
coverage with respect to major medical equipment, institutional health
services and capital expenditures. It requires that States shall specify
in the certificate the maximum amount of capital expenditures which
may be obligated. It requires the Secretary to prescribe the extent to
which a project authorized by a certificate of need shall be subject to
further review if the amount of capital expenditure exceeds the maxi-
mum specified (section 117 (a) and (b) ).

The conference substitute conforms to the House amendment (sec-
tion 117(a)).

Required approval of certain applications

The House amendment contains a provision not included in the
Senate bill that requires the approval of an application for a certificate
of need for a capital expenditure which is required to eliminate or
prevent eminent safety hazards, to comply with State licensure
standards, or to comply with accreditation standards, but only to the
extent that the capital expenditure is required to eliminate or prevent
such hazards or to comply with such standards (section 117(a)).

The conference substitute, as a compromise, includes the House
amendment with the added requirement that approval is not required
if the State agency finds that the facility or service with respect to
which such capital expenditure is proposed to be made is not needed
or that the obligation of the capital expenditure is not consistent with
the State health plan in effect under section 1524 (section 117(a)).

Congress recognizes that some health facilities whose continued
operation is absolutely necessary and is consistent with the SHP may

81

be required, because of licensing problems, to apply for a certificate
of need for the limited purposes of coming into compliance with life
safety code requirements or accreditation standards.

Congress hopes to limit the necessity for planning agencies to go
through a highly formalized and time-consuming review over those
projects which are clearly needed. Yet Congress is also fully aware of
the b"-'denFOjm<> c^f-s ore ted bv excess rapacity and ckrs not intend
that this provision be used to fund capital projects in facilities which
are unneeded or determine by the State Agency to have excess capacity.

Limitations on criteria or conditions under a certificate of need
program

The House amendment contains a provision, not included in the
Senate bill, which requires that the issuance of a certificate of need
may not be made subject to any criterion or condition unless the
criterion or condition directly relates to (a) the ability of the appli-
cant to provide the service for which the certificate is to be issued
(b) the quality of the service and (c) the availability and accessibility
of the service to patients in need of it or is otherwise directly related to
a determination of the need for such service (section 117(a)).

The conference substitute as a compromise provides that the re-
view of an application for a certificate of need shall not be made sub-
ject to any criterion and the issuance of a certificate of need may not
be made subject to any condition unless the criterion or condition is
directly related to the criteria prescribed by section 1532(c), the
criteria prescribed by regulation promulgated under section 1532(a)
before the date of enactment of this Act (see 42 C.F.K. § 123. 409-11),
or criferia prescribed by regulation by the State agency in accordance
with an authorization prescribed by State law. This compromise re-
flects the agreement of the conferees that certificate of need approval
should not be subject to conditions or criteria which are not based
upon Federal or S^ate law. Furthermore, the certificate of need pro-
gram may not be required to include any criterion in addition to
criteria described or set forth pursuant to section 1532 (section 117
(a)). This provision prohibits the Secretary from withholding ap-
proval of a State certificate of need program under section 1523(a)
(4)(B) until or unless the State adopts criteria or authorizes the
imposition of conditions other than those referenced by this provision.

In order to avoid semantic arguments, the conferees wish to make
clear that in this section, the term criteria means a standard or rule
which may be applied to certificate of need applicants during the
review process ; the term condition means a required action applied to
a specific applicant and established as part of a certificate of need
decision following review. These general definitions would apply re-
gardless of what term is used in State law or regulation which
describes these concepts.

Coverage of major medical equipment outside a health care facility
The Senate bill requires a State certificate of need program to pro-
vide for review and determination of need prior to the acquisition of
diagnostic and therapeutic equipment which will not be owned by or
located in a health care facility if notice is not filed as required or the
State agency finds that the equipment will be used to provide services

82

on a regular basis for inpatients of a hospital. Before any person
enters into a contractual agreement to acquire diagnostic or thera-
peutic equipment that will not be owned by or located in a health care
facility such person must notify the State agency of the State in
which such equipment will be located of such person's intent to acquire
such equipment. Such notice must be made in writing at least 30 days
before the contractual arrangements are entered into to acquire the
equipment with respect to which notice is given. Diagnostic or thera-
peutic equipment is added to the definition of institutional health serv-
ice (section 136 and section 142) .

The House amendment excludes from required certificate of need
coverage the acquisition of major medical equipment that is not owned
or located in the health care facility unless the equipment will be used
to provide services for inpatients of a hospital. Any person who plans
to acquire major medical equipment shall notify the SHPDA of such
intent so that the agency can determine if the acquisition requires re-
view. Major medical equipment is defined as any equipment in excess
of the capital expenditure minimum, except that the term does not in-
clude medical equipment acquired by or on behalf of independent
clinicial laboratories to provide clinical laboratory services.

The conference substitute conforms to the House amendment by pro-
viding that all States must require a certificate of need under their
certificate of need programs for the acquisition of major medical
equipment that is not owned by or located in a health care facility if
that equipment is to be used to provide services for inpatients of a
hospital. However, as a compromise, the conference substitute allows
the States to require a certificate of need for any other uses of major
medical equipment not owned by or located in a health care facility if
they currently provide for the additional requirements or if they pro-
vide for such additional requirements prior to September 30, 1982.
After that date, a State would be prohibited from changing its certif-
icate of need program to include requirements that are in addition to
the minimum requirements set forth in title XV (section 117(a)).

The conferees note that in order for a certificate of need program to
be acceptable under title XV, it must provide for the review and ap-
proval of the acquisition of major medical equipment that will be used
to provide services to patients who are inpatients of a hospital at the
time the service was provided. Equipment acquired by or on behalf
of a clinical laboratory to provide clinical laboratory services is not re-
quired to be reviewed. The conferees want to make clear that this pro-
vision is a minimum requirement of an acceptable certificate of need
program, and that a State is permitted to cover medical equipment
acquired for use in other than inpatient settings, which costs less than
$150,000 or which is acquired by a clinical laboratory. Although States
would be prohibited from changing their law to go beyond the mini-
mum requirement after September 30, 1982, no State which had im-
posed additional requirements before that date would be required to
alter those requirements.

The conferees also wish to make clear that the term "contractual
arrangement" is not intended to prohibit normal marketing negotia-
tions for purchase of equipment such as a notice of intent to purchase.
However, such a notice of intent to purchase would have to contain a
condition to the effect that the notice of intent would only become a con-

83

tractual arrangement thirty days after the filing of the purchaser's re-
quired notice to the State Agency of intent to acquire such equipment.

Coverage of health maintenance organizations

The Senate bill establishes special criteria under which certificate
of need applications of health maintenance organizations will be re-
viewed and approved. Applications of Federally qualified HMO's for
new institutional health services must be approved by the State agency
if it finds that (1) approval is required to meet the needs of present
HMO members and new members who can reasonably be expected
to enroll, and (2) that the HMO is unable to provide, through services
or facilities which can reasonably be expected to be available to the
organization, its institutional health services in a reasonable and cost
effective manner consistent with the basic method of operation of the
HMO and which makes such services available on a long term basis
through physicians and other health professionals associated with the
HMO. It further provides that no certificate of need program shall
have provisions for the review and determination of need of the serv-
ices, facilities, equipment and organization of health maintenance orga-
nizations and the entities through which their services are provided
except for new institutional health services of hospitals controlled
directly or indirectly by health maintenance organizations and diag-
nostic and therapeutic equipment of health maintenance organiza-
tions (section 148 and section 136).

The House amendment requires a State to exempt from its certifi-
cate of need program the development of new institutional health
services, the acquisition of major medical equipment and the obliga-
tion of capital expenditures of (1) a health maintenance organiza-
tion, (2) any other provider of health care which provides ambulatory
and inpatient health services on a prepaid basis if at least 75 percent
of the patients who use the service or equipment which is exempt are
enrollees of the organization or provider and (3) any other provider
who has entered into agreements to serve enrollees of an HMO or
other providers (described in 2 above) if at least 75 percent of the
annual revenues from the service, equipment, or expenditure are de-
rived from such agreements.

If in any year an exempt HMO or provider fails to meet the 75 per-
cent patient or revenue requirement, the State shall prohibit the HMO
or provider from using the service, equipment or expenditure to pro-
vide services to individuals other than those enrolled on a prepaid basis
with the HMO or provider. Notice shall be provided to the Secretary
and the State Medicaid agency that the provider is prohibited from
using the service, equipment or expenditure to provide services to in-
dividuals who are entitled to benefits under Titles XVIII and XIX
of the Social Security Act unless the individuals are enrolled on a
prepaid basis with an HMO or other exempt provider. The House
amendment also provides that the certificate of need program may
apply to an HMO only to the extent that it is not exempt and then only
to the acquisition of major medical equipment, the offering of new
institutional health services, and the obligation of capital expendi-
tures as required in Title XV (section 117 (a) ) .

The conference substitute, as a compromise, provides that a cer-
tificate of need program may not require a certificate of need for the

84

offering of an inpatient institutional health service, the acquisition of
major medical equipment, or the obligation of a capital expenditure
for the provision of an inpatient institutional health service by: (1) a
health maintenance organization or combination of health mainte-
nance organizations; (2) a health care facility which primarily pro-
vides inpatient services and is controlled directly or indirectly by a
health maintenance organization or a combination of health mainte-
nance organizations: or (3) a health care facility or portion thereof
which an HMO or combination of HMOs has leased for a period of at
least 15 years at the time of approval of the application.

To be eligible for an exemption under this provision, health main-
tenance organizations must meet the definition of a health maintenance
organization set forth in this bill and must have an enrollment of at
least 50,000 individuals singly or in combination, the facility in which
the service will be provided must be geographically located so that the
service will be reasonably accessible to such enrolled individuals, and
at least 75 percent of the patients who can reasonably be expected to
receive the institutional health services to be exempted will be indi-
viduals enrolled with such organization or organizations in combina-
tion. The applicant must submit to the State agency an application
which allows the State agency to determine if the organization, com-
bination, or facility meets the necessary requirements.

A health care facility (or any portion thereof) or medical equip-
ment owned or controlled by an HMO or combination of HMOs with
respect to which an exemption was granted under this provision may
not be sold or leased or a controlling interest in such facility or equip-
ment may not be acquired ; and a health care facility (or any portion
thereof) or medical equipment leased by an HMO or combination of
HMOs with respect to which an exemption was granted under this
provision may not be used by anyone other than the lessee HMO
or combination of HMOs, unless the State agency issues a certificate
of need approving the sale, lease, acquisition or use or the State
agency determines (upon application) that the entity to which the
facility is proposed to be sold or leased or which intends to acquire con-
trolling interest is a health maintenance organization or combination
of organizations which meet the requirements of the section. The sub-
stitute also requires the Comptroller General to conduct an evaluation
of the exemption authority established under this Act.

The substitute also provides that a State may apply its certificate
of need requirements to the institutional health services, major medical
equipment, and capital expenditures of a health maintenance organiza-
tion or of a health care facility which is controlled, directly or indi-
rectly, by an HMO only to the extent that the organization or facility is
not exempt imder this provision, and then only to the offering of in-
patient institutional health services, the acquisition of major medical
equipment, and the obligation of capital expenditures as required
under title XV. The substitute also contains a special provision for
review of applications for certificates of need for non-exempt HMO's
or for facilities controlled, directly or indirectly, by an HMO. Such
applications shall be approved by the State agency if the State agency
finds that an approval of the application is required to meet the needs
of the members of the HMO and that the HMO is unable to provide its
services through services and facilities which can reasonably be ex-
pected to be available to the organization in the community.

85

For purposes of this section indirect control of a health care facility
conld include such situations in which a majority of the members of
the board of the hospital corporation are employees, officers or direc-
tors of an HMO or in which members of the board of an HMO are
the same as the members of the board of the hospital corporation.

The conferees have allowed a "combination of health maintenance
organizations" to meet the 50,000-enrollee minimum in order to per-
mit two or more HMO's to join together to own, or control a corpora-
tion or other entity which owns, or lease a health care facility.

In permitting an exemption for an institutional health service which
is owned, controlled, or leased by a combination of HMO's, the con-
ferees intend that each of the HMO's in the combination will use the
institutional health service.

Definition of capital expenditure

The House amendment contains a provision, not included in the
Senate bill, which defines the term capital expenditure for purposes of
a certificate of need program. A capital expenditure is defined as an
expenditure made by or on behalf of a health care facility and which
under generally accepted accounting principles is not chargeable as
an expense of operations and maintenance or is made by a lease or
comparable arrangement and which (1) exceeds the expenditure mini-
mum, (2) substantially changes the bed capacity of the facility with
respect to which the expenditures made, or (3) substantially changes
the services of the facility (section 117(a) ) .

The conference substitute conforms to the House amendment with
the exception of the provision relating to the exclusion from the defini-
tion of capital expenditure the acquisition of existing health care
facilities (section 117(b) ). The substitute provides that a certificate of
need shall be required for the obligation of a capital expenditure to
acquire (by purchase or under lease or comparable arrangement) an
existing health care facility if (1) notice is not provided to the State
agency before a contractual arrangement is entered into, or (2) if the
State agency finds within 30 days after the date it receives such notice
that the services or bed capacity of the facility will be changed in
being acquired (section 117(a)). The conferees note that while this
provision sets forth conditions under which a certificate of need will
be required, it does not preclude a State from adopting broader cover-
age requirements or requiring that all acquisitions be reviewed under
normal certificate of need procedures.

Definition of expenditure minimum

The House amendment contains a provision, not included in the
Senate bill, which establishes a definition for the term expenditure
minimum to mean $150,000 for the first 12 month period after enact-
ment and for each 12 month period thereafter $150,000 adjusted to
reflect changes in the composite construction cost index maintained
by the Department of Commerce (section 117(b)).

The conference substitute would allow a State to increase the capital
expenditure and annual operating cost thresholds of their certificate
of need programs to reflect the change in the preceding twelve-month
period of an index maintained or developed by the Department of
Commerce and designated by the Secretary of HEW for purposes of
making such adjustment (section 117(f)).

86

Osteopathic considerations

The Senate bill contains a provision that adds to the criteria
required for HSA and State agency consideration the special needs
and circumstances of osteopathic facilities accredited for post grad-
uate training (section 148).

The House amendment provides that in reviewing an application
for a certificate of need the HSA and State agency shall consider the
application on the basis of the need for and the' availability in the
community of services and facilities for osteopathic and allopathic
physicians and their patients. State agencies shall also consider the
impact of the approval of application on training programs for doc-
tors of osteopathy and medicine.

The conference substitute conforms to the House amendment (sec-
tion 117(a)).

APPROPRIATENESS REVIEW

Minimum issues for appropriateness review

The Senate bill contains a provision, not included in the House
amendment, which requires that in carrying out appropriateness
reveiws, HSA's shall at a minimum address issues of need, accessibility,
financial viability, cost effectiveness, costs and charges to the public
and quality of service provided (section 123(a) ).

The conference substitute as a compromise specifies that both HSA's
and SHPDA's, in carrying out appropriateness reviews, shall at a
minimum address issues of need, accessibility, financial viability, cost
effectiveness, and quality of services provided (section 118(b)).

The conferees note that appropriateness review findings can be made
on either an areawide basis or institution-specific basis. The decision
on how specific to make an appropriateness review recommendation or
finding by the health systems agency or the State agency should be
based upon the nature and the seriousness of the problem which makes
the service inappropriate, its susceptibility to change, the amount of
information the agency has about the problem, and judgments about
how best to achieve needed changes within the agency's area. It is the
conferees' intent that agencies within each State make the decision on
how best to handle this issue. It is the conferees' expectation that over
time agencies will be able to make detailed appropriateness review
findings. Such findings should provide the consumer with better
information about the health services which are available so that
informed choices can be made about the institutions from which serv-
ices are received. Such specific findings should also provide institu-
tions with recommendations of the changes which should take place to
make the services of the area appropriate. When an agency makes its
recommendation or finding on an institution-specific basis, the com-
mittee expects that it will establish hearing procedures to ensure that
each institution under review will have an adequate opportunity to
present all relevant information regarding its services and facilities.

REVIEW AND APPROVAL OF PROPOSED USES OF FEDERAL FUNDS

Review of project and allotment grants

The House amendment contains a provision, not included in the
Senate bill, that requires the SHCC to review any application sub-

mitted to the Secretary by a State for a grant or contract awarded
under the Public Health Service Act. the Comprehensive Alcohol
Abuse and Alcohol Prevention. Treatment and Reliabilitation Act. or
section 409, of the Drug Abuse Office and Treatment Act for projects
in more than one health service area. If the SHCC recommends dis-
approval, the Secretary may not make Federal funds available if he
finds that the application is not in conformity with the State health
plan. The amendment also provides that when a State is making
grants or contracts in a health service area from funds received under
the covered acts, the Governor of the State shall allow the health sys-
tems agency 60 days to review the proposed use of those funds in its
area and approve or disapprove such use. The Governor, after taking
into consideration the HSA's decision and any comments which the
SHPDA has developed, may make such Federal funds available for
use notwithstanding the disapproval of the HSA only if the decision
of the Governor is made available to the appropriate HSA and
SHPDA and contains a detailed statement of the reasons for the deci-
sion (section 119).

The conference substitute conforms to the House amendment
(section 119(a)).

Review of research and training proposals

The Senate bill provides that grants or contracts under Titles IV.
VII. or VIII of the Public Health Service Act should not be reviewed
by the HSA unless they are made, entered into, or used to support the
development of health resources, or the delivery of health services
that would make a significant change in the health services offered
within the health service area (section 123 (b) ) .

The House amendment provides that research and training under
the Public Health Service Act should not be reviewed unless the
grants are to be made, entered info. or used for the development, ex-
pansion or support of health resources which, in the case of grants or
contracts for training, would make a significant change in the health
services available in the health service area, or which, in the case of
grants or contracts for research, would change the delivery of health
services, or the distribution or extent of health resources available to
persons in the health service area other than those who are partici-
pants in such research (section 119 (b) ) .

The substitute conforms to the House amendment (section 119(b) ).
The conferees note that research includes clinical trials. Such trials
include demonstration projects designed to answer questions about
the general applicability of procedures, drugs, or devices with poten-
tial usefulness that have nof been tested in nonlaboratory settings.
The conferees intend that such projects shall not be reviewed unless
the projects are initiated with a community or institutional commit-
ment to continue them beyond their research stage or unless the proj-
ects involve a change in the health services of the area as detailed
above.

Review of Federal facilities

The Senate bill provides that when a health systems agency is re-
quested by or on behalf of a Federal department or agency to review a
proposed use of Federal funds to support the development of institu-
tional health services intended for use in the health service area, the

88

health systems agency shall, within 60 of receiving a request, submit
its views on such a proposed use to the Federal department or agency
involved and to the appropriate committees of the Congress (section
152).

The conference substitute conforms to the House amendment. Al-
though the conference substitute does not require, as did the Senate
bill, a health systems agency, when requested, to review and comment
on a proposed use of Federal funds to support the development of in-
stitutional health services intended for use in a health service area,
the conferees believe that when a Federal agency requests a health
systems agency's views on a use of funds proposed by the agency,
the HSA should respond to such request even though its response is
purely advisory and in no way binding on Federal decision making.

COORDINATION OF HEALTH PLANNING WITH RATE REVIEW

Bate regulation grants

The House amendment contains a provision, not included in the
Senate bill, which amends section 1526 by providing that rate regula-
tion grants can be made to any unit in the State which regulates rates
although provisions are added to assure adequate coordination with
the State planning agency (section 120 (a) and (b) ) .

The conference substitute conforms to the House amendment (sec-
tion 120(c)).

COORDINATION WITHIN STANDARD METROPOLITAN STATISTICAL AREAS
AND WITH OTHER ENTITIES

Coordination within standard metropolitan statistical areas

The House amendment contains a provision, not included in the
Senate bill, which requires that HSA's which are part of a standard
metropolitan statistical area shall develop a mechanism to coordinate
their plan development and project review functions (section 121).

The conference substitute conforms to the House amendment (sec-
tion 121(b)).

The conferees intend the required coordination to include the joint
review of each health systems plan and annual implementation plan
developed for each health service area included within the SMSA,
the joint review of criteria used in making reviews affecting the region,
and the joint review of each decision under certificate of need which
affects the region. Moreover, the conferees would encourage the de-
velopment of a number of joint activities between or among such
HSA's, including joint task forces on the establishment of planning
goals for the SMSA, coordination and an intergrated use of data
for the SMSA, and joint planning and review task forces.

Coordination with other entities

The Senate bill contains a provision which provides that an HSA
will also coordinate its activities with entities which review rates and
budgets of health care facilities and with appropriate area agencies
on aging, local and regional alcohol abuse, drug abuse, and mental
health planning agencies. The State agency is also to coordinate its
activities with any entity which reviews rates and budgets of health
care facilities (section 122).

89

The House amendment provides that each HSA and SHCC shall co-
ordinate its activities with any agency which reviews rates and budgets
of health care facilities (section 120 (a) and (b)).

The conference substitute conforms to the Senate bill (sections 120
and 121).

COLLECTION AND PUBLICATION OF HOSPITAL CHARGES

Collection and publication

The Senate bill amends section 1513 by adding a new section re-
quiring the States to collect annually, on a form developed in consulta-
tion with the State agency, the rates charged for each of the 25 most
frequently used hospital services in the State including the average
semiprivate and private room rates. The HSA must make such infor-
mation available to the public for inspection and copying in readily
understandable language and in a manner designed to facilitate com-
parisons among the hospitals in the health service area.

The conference substitute conforms to the Senate bill (section
122(a)).

The conferees note that if a State has an agency which reviews hos-
pital rates then the HSA should work closely with that agency in
carrying out this function.

Penalty for not providing information on charges

The Senate bill provides that a State certificate of need program
shall provide that no hospital shall be an applicant for a certificate of
need unless such hospital has complied with all reasonable requests
from an HSA for information needed to comply with the HSA's
mandate to collect and publish hospital charges (section 136).

The conference substitute requires that the State administrative pro-
gram contain provisions to assure compliance with requests for infor-
mation made by an HSA in carrying out this function (section
122(b)).

STATE HEALTH PLANNING AND DEVELOPMENT AGENCIES

Redesignation or termination of State agency agreement

The Senate bill contains a provision, not included in the House
amendment, which provides for the redesignation of State health
planning and development agency for up to a three year period, and
permits the Secretary the option of either terminating or returning a
fully designated State agency to conditional status for a one year
period for nonperformance of its functions. After the one year period,
the Secretary must either fully designate the State agency or terminate
its agreement. Before renewing the agreement, the Secretary shall pro-
vide each HSA and the SHCC an opportunity to comment on the
performance of the agency. It also provides that the Secretary shall
review a State administrative program for health planning not less
often than once every three years (sections 131 and 134).

The conference substitute conforms to the Senate bill (sections 123
(a) and ( (b) ). The conference substitute also provides for the Secre-
tary to enter into agreement with the fully designated State agency for
a period of up to 36 months rather than annually as currently provided.

90

The conferees believe it is unproductive for every State agency to be
subject to an annual detailed review and that necessary monitoring
of the State agency's performance can be accomplished through regular
reporting requirements. However, for those fully designated State
agencies which are still expanding or developing their programs, the
conferees expect the Secretary to use the designation period of one to
two years so that HEW can effectively monitor performance ; but, as
these State agencies mature and reach an appropriate level of per-
formance, the conferees expect that their designation agreement will be
for three years.

Medical facility planning

The House amendment contains a provision, not included in the
Senate bill, which repeals the functions required pursuant to section
1513(h) respecting the need for the HSA to make separate recom-
mendations to the State on medical facility projects for moderniza-
tion and construction. It also adds to the functions required to be per-
formed by the State agency preparation of an inventory of medical
facilities located in the State and an evaluation of the physical condi-
tion of such facilities. Such determination shall be reported to the
HSA's to be used in the preparation of their SHP's (section 122).

The conference substitute conforms to the House amendment (sec-
tion 123 (c) ) . With this change in law and the requirement that the
State health plan be more specific and include resource requirements,
the conferees intend that the State health plan serve as the document
for medical facilities planning for the State. The requirement for
a separate State medical facilities plan as required by Title XVI is no
longer needed and is deleted from existing law.

Failure to qualify for full designation

The Senate bill contains a provision, not included in the House
amendment, that provides that a State without a designated SHPDA
in effect by September 30, 1980 would be subject to a 25 percent reduc-
tion in the amount of any allotment of a grant, loan, loan guarantee, or
any contract under the Public Health Service Act, Community Medi-
cal Health Centers Act, or the Comprehensive Alcohol Abuse and Al-
coholism Prevention Treatment, Rehabilitation Act of 1980, Such
amounts would be reduced by 50 percent if an agreement weren't in
effect by September 30, 1981, by 75 percent after September 30, 1982,
and by 100 percent after September 30, 1983 (section 132) .

The House amendment provides that if a State does not have a fully
designated agency upon the expiration of (1) fiscal year 1980; (2)
the first regular session of the legislature of the State which begins
after the promulgation of regulations under section 117(e) of these
amendments; or (3) the sixth month after the month in which such
regulations are promulgated whichever occurs later, no grant may be
made to or contract entered into with the State with funds authorized
by the Public Health Service Act or related Acts (section 122(d)).

The conference substitute as a compromise provides for percentage
reductions in the penalty as set forth in the Senate bill which would
take effect upon the expiration of (1) fiscal year 1980, or (2) if a
legislature of a State is in a regular session on the date of enactment
of these amendments, and the legislature will be in session for at least
12 months from such date, or (3) if the legislature of a State is in ses-

91

sion on the date of enactment but there is not 12 months remaining in
such session after such date or if the legislature of the State is not in
session on such date, 12 months after the beginning of the first regular
session of the legislature beginning after such date, whichever occurs
later (section 123(d)).

State agency technical assistance

The Senate bill contains a provision, not included in the House
amendment, which requires the State Agency to provide technical
assistance in obtaining and filling out the necessary forms to individ-
uals and public and private entities for the development of projects
and programs (section 135).

The conference substitute conforms to the Senate bill. Conferees
emphasize that the intent in adding this section is not to require the
State Agency to prepare an application for an individual desiring
a certificate of need or other agency forms, but merely to assist him in
understanding the application requirements (section 123(e)).

Extension of State agency conditional designation

The Senate bill contains a provision which would allow a State
health planning and development agency to be designated for up to
48 months (section 131).

The House amendment provides that the Secretary may extend the
period of conditional designation (now limited to 36 months) for such
additional time as he finds appropriate if he finds that the designated
State agency is making a good faith effort to comply with the require-
ments of section 1523 (section 122(g)).

The conference substitute conforms to the House amendment (sec-
tion 123(f)).

STATEWIDE HEALTH COORDINATING COUNCIL COMPOSITION

Membership

The Senate bill contains a provision, not included in the House
amendment, to clarify that consumers and providers of health care
included consumers and providers of mental health care for purposes
of SHCC composition. It further provides for ex-officio representation
of the Veterans' Administration on the SHCC when the State has
at least one YA facility (section 138 (c) ) .

The conference substitute as a compromise specifies that the VA
shall have ex-officio non-voting representation on the SHCC when the
State has at least one VA facility (section 124 (c) ) .

Review of drug abuse

The Senate bill expands the mandate of SHCC review of State plans
to include sections 409 and 410 of the Drug Abuse Office Treatment
Act (section 138(d)).

The House amendment expands SHCC review of State plans to
include section 409 of the Drug Abuse Office and Treatment Amend-
ments of 1972 (section 119 (a) ) .

The conference substitute conforms to the House amendment
(section 119(a)).

Representation of medically underserved

The Senate bill provides that members of the SHCC who are con-
sumers of health and mental health care and who are not providers

92

of health or mental health care must include individuals who are
members of rural and urban medically underserved populations if
such populations exist in the State (section 138 (e) ) .

The conference substitute requires representatives of medically
under served populations on the SHCC (section 124(a) ) .

Representation of interstate HSA^s

The House amendment contains a provision, not included in the
Senate bill, which provides that while HSA's, other than interstate
HSA's, are to have equal representation on the SHCC, interstate
HSA's are to have proportional representation (but at least one
representative). It also provides that in States with more than 10
HSA's each may be entitled to one representative (section 123(a)).

The conference substitute conforms to the House amendment (sec-
tion 124 (a)).

The conferees note that this provision was adopted so that the size
of the SHCC can be kept manageable in States which have a large
number of HSA's. The conferees which to point out that while HSA's
in States with more than 10 HSA's would be entitled to only one rep-
resentative, this would not preclude the Governor from allowing each
HSA to have more than one representative and thereby establishing
a larger Statewide Health Coordinating Council.

Selection of State Health Coordinating Covncil Chairman

The House amendment contains a provision, not included in the
Senate bill, which provides that the Governor may select the Chair-
man of the State Health Coordinating Council with the advice and
consent of the State Senate (section 123(b) ).

The conference substitute conforms to the House bill (section 124
(b».

Provider representation

The House amendment contains a provision, not included in the Sen-
ate bill, which provides that (1) half of the providers represented on
the SHCC shall be direct providers, (2) members of the SHCC shall
represent the provider classifications listed in section 1512(b) (3) (c)
(ii), and (3) of such members at least one shall be engaged in the
administration of a hospital (section 1£3 (c) ).

The conference substitute as a compromise specifies that at least one
half of the providers on the SHCC shall be direct providers (sec-
tion 124(c)).

CENTERS FOR HEALTH PLANNING

The Senate bill contains a provision, not included in the House
amendment, that requires the Secretary to enter into grants with
Centers for Health Planning. In addition, it adds the requirement
that centers develop and disseminate methodologies to educate new
board members and staff and provide continuing education for pres-
ent HSA members of the staff and State Agency staff (section 149).

The conference substitute conforms to the Senate bill although both
grants or contracts can be used (section 125).

93

DEFINITIONS

Definitions of HMO

The Senate bill contains provisions, not included in the House
amendment, which add definitions of a health maintenance organiza-
tion to the Act (section 153) .

The conference substitute conforms to the Senate bill (section 117).

Definition of medically underserved population

The Senate bill contains a provision not included in the House
amendment, which provides that the term "medically underserved
population" has the same meaning as such term as under section 330
(b) (3) of the Public Health Service Act (section 1|53) .

The conference substitute conforms to the Senate bill (section 126).

Definition of rehabilitation facilities

The Senate bill defines rehabilitation facilities as any facility which
is operated for the primary purpose of providing rehabilitation serv-
ices to handicapped individuals and which provides singly or in com-
bination one or more of a list of services for handicapped individuals
(section 153).

The House amendment defines rehabilitation facilities as an in-
patient facility which is operated for the primary purpose of assisting
in the rehabilitation of disabled persons who are in an integrated
program of medical and other services which are provided under com-
petent professional supervision (section 117(c) ) .

The conference substitute as a compromise adopts the definition in
the House amendment for certificate of need purposes and defines re-
habilitation facilities as an inpatient or outpatient facility for the
other purposes of this legislation (section 126) .

The compromise provides that a broad definition shall apply to
HSA governing board representation, definition of "provider of
health care," and inclusion of rehabilitation services in health system
agency plans and State health plans. The report adopts the House
definition of rehabilitation facility for purposes of certificate of need
coverage. The conference, committee adopts this compromise with the
understanding that any proposed conversion of acute care beds or serv-
ices to inpatient rehabilitation beds or services by any hospital would
require review under a State certificate of need program.

The objective of this compromise is to include both inpatient and
outpatient rehabilitation facilities in all phases of the health planning
system other than certificate of need which shall be limited to inpatient
facilities, including conversion of existing service capacity to rehabili-
tation usage.

AUTHORIZATIONS

Health systems agencies authorization

The Senate bill provides authorization of appropriations for HSA's
at a level of $150,000,000 for fiscal year ending September 30, 1980,
$175,000,000 for fiscal year ending September 30, 1981, and $200,000,-
000 for fiscal year ending September 30, 1982 (section 129(c) ).

The House bill provides authorizations for appropriations for
HSA's at a level of $150,000,000 ending September 30, 1980, $160,000,-

94

000 for fiscal year ending September 30, 1981, and $170,000,000 for
fiscal year ending September 30, 1982 (section 124(a) ) .

The conference substitute as a compromise provides for $150,000,000
for fiscal year 1980, $165,000,000 for fiscal year 1981, and $185,000,000
for fiscal year 1982 (section 127 (a) ).

State health planning authorization

The Senate bill provides for authorizations of appropriations for
State agencies at a level of $40,000,000 for fiscal year 1980, $45,000,000
for fiscal year 1981, and $50,000,000 for fiscal year 1982 (section 139).

The House amendment provides for authorizations of appropria-
tions for State agencies at a level of $35,000,000 for fiscal year 1980,
$37,000,000 for fiscal year 1981, and $39,000,000 for fiscal year 1982
(section 124(b)).

The conference substitute as a compromise specifies authorizations
of appropriations of $35,000,000 for fiscal year 1980, $40,000,000 for
fiscal year 1981, and $45,000,000 for fiscal year 1982 (section 127(b)).

Rate review authorizations

The Senate bill provides authorizations of appropriations for rate
setting under section 1626(e) of $6,000,000 for fiscal year 1980, $6,000,-
000 for fiscal year 1981 and $6,000,000 for fiscal year 1982 (section 140) .

The House bill provides authorization of appropriations for rate
review of $6,000,000 for fiscal year 1980, $7,000,000 for fiscal year 1981,
and $8,000,000 for fiscal year 1982 (section 126 (e) ) .

The conference substitute conforms to the Senate bill (section
127(c)).

Centers for health planning

The Senate bill provides authorizations of appropriations for cen-
ters for health planning and technical assistance of $6,000,000 for
fiscal year 1980, $8,000,000 for fiscal year 1981 and $10,000,000 for
fiscal year 1982 (section 149) .

The House amendment provides authorizations of appropriations
for carrying out section 1534 of $10,000,000 for fiscal year 1980,
$11,000,000 for fiscal year 1981, and $12,000,000 for fiscal year 1982
(section 125(d)).

The conference substitute as a compromise specifies authorizations
of appropriations for the support of activities under section 1534
$6,000,000 for fiscal year 1980, $8,000,000 for fiscal year 1981, and
$10,000,000 for fiscal year 1982 (section 127 (d) ) .

Area health services development fund

The Senate bill contains no authorizations of appropriations for the
area health services development funds.

The House amendment contains authorizations of appropriations
for the same purpose at a level of $25,000,000 for fiscal year 1980,
$40,000,000 for fiscal year 1981, and $50,000,000 for fiscal year 1982
(section 125).

The conference substitute as a compromise provides $20,000,000 for
fiscal year 1981 and $30,000,000 in fiscal year 1982 (section 127(e) ).

95

TECHNICAL AMENDMENT

Percentage of HMO enrollees

The House amendment contains a provision amending section 1903
(m) (2) (c) of the Social Security. Act to allow a health maintenance
organization three years from the time it is qualified to meet the re-
quirement that at least 50 percent of an HMO's enrolled population be
made up of other than Medicare and Medicaid recipients (section 126) .

The conference substitute conforms to the House amendment (sec-
tion 128).

Miscellaneous amendments

The Senate bill contains a provision, not included in the House
amendment, which repeals section 314 (a), (b) and (c) and Title 9 in
its entirety.

The conference substitute conforms to the Senate bill.
Report on effectiveness of planning law

The House amendment contains a provision, not included in the
Senate bill, which specifies that the Secretary shall report to the Con-
gress on the results of the review conducted pursuant to Section 1535
respecting improvements in health and health care and restraints on
increases in health care costs (section 125].

The conference substitute conforms to tne Senate bill.

EFFECTIVE DATES

The Senate bill provides that amendments to Title XV shall take
effect on the date of enactment of this Act, except that certain amend-
ments shall take effect one year from the date of enactment and other
amendments shall take effect six months from the date of enactment
except that on or after the date of enactment, the HSA's, the State
Agencies, and the SHCC's, may make the organizational and related
changes required and may act in accordance with the changes in their
functions made by such amendments (section 157) .

The House amendment provides that certain amendments shall take
effect one year after the date of enactment except that on or after the
date of enactment, the changes in membership of the HSA's and the
SHPDA's shall be implemented through selection of members to fill
vacancies occurring after such date, except that the HSA (the State
Agency and the SHCC may make the organizational and related
changes required and act in accordance with the changes in their func-
tions at any time. Changes in certificate of need requirements become
effective 180 days after enactment except when a change in law is re-
quired in which case a longer period is allowed (section 127).

The conference substitute conforms to the House amendment (sec-
tion 129).

The conferees note that the changes in the HSA funding provisions
are not effective until the Congress has adopted an appropriation for
fiscal year 1980.

96

Title II — Kevision of Authority for Health Kesources
Development

revision and extension of assistance

Approval of medical facilities plan

The Senate bill contains a provision, not included in the House
amendment, which requires the Governor as well as' the SHCC to
approve the State Medical Facilities Plan (section 201).

The conference substitute conforms to the House amendment.

Repeal of allotment grants

The House amendment contains a provision, not included in the
Senate bill, which repeals Part B of Title XVI, the Part which pro-
vides allotment grants to States for facility construction and sets
forth requirements for the State medical facilities plan (section 201).

The conference substitute conforms to the House amendment (sec-
tion 201(a)).

Loan fund capitalization

The Senate bill contains a provision, not included in the House
amendment, which authorizes additional capitalization of the loan
fund in any fiscal year through 1981 (section 203) .

The conference substitute conforms to the Senate bill 201(b)).

Purposes of loan and loan guarantee authorizations

The House amendment contains a provision, not included in the
Senate bill, which restructures the loan and loan guarantee provisions
of section 1620 to provide assistance for projects in the following
priority areas:

1. modernization of medical facilities;

2. construction of new outpatient medical facilities;

3. construction of new hospitals in (a) areas of rapid popula-
tion growth or (b) areas where mergers or closure of medical
facilities results in a reduction of new beds; and

4. conversion of existing medical facilities, outpatient medical
facilities, or facilities for long term care (section 201 (b) ) .

The Senate bill contained similar provisions.

The conference substitute as a compromise provides that the loan
fund may be used to support projects for (1) the discontinuance of
unneeded hospital services or facilities, (2) the conversion of unneeded
hospital services and facilities to needed health services and medical
facilities, including outpatient medical facilities and facilities for
long term care; (3) the renovation and modernization of medical
facilities, particularly projects for the prevention or elimination of
safety hazards or the avoidance of noncompliance with licensure or
accreditation standards, or projects to replace obsolete facilities; (4)
the construction of new outpatient medical facilities and (5) the con-
struction of new inpatient medical facilities in areas which have
experienced recent rapid population growth (section 201 (b) ) .

Interest subsidies

The Senate bill provides that the Secretary may pay to the holder
of a loan amounts sufficient to reduce up to one-half of the net effective
interest rate otherwise payable on the loan if the Secretary finds that

97

without such assistance the project could not be understaken (section
207(d)).

The House amendment provides that the Secretary shall pay the
holder of any loan amounts sufficient to reduce by 3 percent per annum
the net effective interest rate otherwise payable on the loan if the
project is located in an urban or rural poverty area (section 201(b) ).

The conference substitute as a compromise provides that the Secre-
tary may pay the holder of a loan an amount sufficient to reduce by not
more than one-half the net effective interest rate if the loan is located
in an urban or rural poverty area (section 201 (b) ) .

Loan guarantee support for public entities

The Senate bill contains a provision, not included in the House
amendment, which would allow the Secretary to guarantee the loans
of non-federal lenders to public entities in addition to non-profit pri-
vate entities (section 207 (b) ) .

The conference substitute conforms to the Senate bill (section
201(b)).

Grant support to nonprofit private entities

The House amendment contains a provision, not included in the
Senate bill, which would allow grants to be made under section 1625
to nonprofit private hospitals. This section authorizes grants for con-
struction or modernization projects to eliminate imminent safety
hazards and avoid noncompliance with licensure and accreditation
standards. Existing law limits grants to public medical facilities
(section 201(c)).

The conference substitute as a compromise restricts the eligibility
of private non-profit medical facilities for such grants. The conferees
intend to permit only those private non-profit medical facilities to be
eligible for grants which can demonstrate that they serve their com-
munity in a capacity similar to that of a public hospital. The con-
ferees adopted three criteria for this determination : the demonstrated
level of community service; the proportion of patients served who
are unable to pay for such services themselves or through third party
reimbursement ; and the impact on services to low-income individuals
if the grant were denied. These eligibility criteria are to be used in
addition to the other criteria currently used to determine the award of
grants under section 1625.

The conferees intend that "level of community service" refer to the
well-established definition of that phrase under the Hill-Burton pro-
gram, and not be interpreted as simply a measure of the relative pov-
erty level of the local population.

The conferees also intend that the lack of access to a public hospital
be considered by the Secretary as part of the impact on services to low-
income individuals criteria in determining eligibility for grants under
this section.

Authorization for grants for modernization

The Senate bill provides authorizations of appropriations under sec-
tion 1625(d) modernization of public hospitals of $40,000,000 in fiscal
year 1980, $50,000,000 in fiscal year 1981, and $50,000,000 in fiscal year
1982 (section 204).

The House amendment contains authorizations of appropriations of
$50,000,000 for each of those three fiscal years (section 201(c)).

98

The conference substitute conforms to the Senate bill (section
201(c)).

Outpatient medical facilities

The House amendment contains a provision, not included in the
Senate bill, which establishes a project grant program for the con-
struction of outpatient medical facilities in medically underserved
areas and the conversion of existing facilities into outpatient medical
facilities or facilities for long term care. A grant could be awarded
for up to 80 percent of the cost of such projects and 100 percent of the
costs of such projects located in urban or rural public areas. Fifteen
million is authorized for each fiscal year from 1980, 1981 and 1982 for
this purpose (section 201(c) ).

The conference substitute conforms to the House amendment ex-
cept that no funds are authorized for fiscal year 1980 (section 201(c) ).

Continued availability of funds under section 1625

The Senate bill contains a provision, not included in the House
amendment, which provides that funds appropriated in fiscal year
1976 for medical facility construction under section 1613 but not yet
expended may be available through fiscal year 1980 to carry out the
purposes of 1625(d) which provide grants to public hospitals for the
modernization and construction to meet life and safety code violations
(section 202).

The conference substitute conforms to the Senate bill (section
201(c)).

TECHNICAL AND CONFORMING AMENDMENTS

The House amendment contains a provision, not included in the
Senate bill, which adds conforming and technical amendments to Title
XVI (sections 202 and 203) .

The conference substitute conforms to the House amendments (sec-
tions 202 and 203).

Title III — Program to Assist and Encourage the Discontinuance
of Unneeded Hospital Services

establishment of program

The Senate bill would establish a program under which financial
assistance would be provided to hospitals for the discontinuance of
unneeded hospital services and the conversion of unneeded hospital
services to services needed by the community. Under the program debt
payments, incentive payments, and conversion payments would be
provided for the discontinuance of all inpatient health services or an
identifiable unit of a hospital or an identifiable part of a hospital which
provides inpatient health services. Funds appropriated for this pro-
gram could also be used by the Secretary of HEW to make grants
to State health planning and development agencies for planning,
evaluating, or carrying out programs to decertify health care facili-
ties providing health services which are not appropriate.

The House amendment would establish a program under which
grants and technical assistance would be provided to hospitals to assist
and encourage them to discontinue all hospital services or of an in-
patient hospital service by converting an identifiable part of a hospital

99

facility to the provision of other health services. The House amend-
ment would also make separate authorization of appropriations for the
Secretary to make grants to State health planning and development
agencies to assist such agencies in addressing the problems of excess
capacity reduction.

The conference agreement conforms to the House amendment with
the following changes.

1. Grants and technical assistance may also be provided for the dis-
continuance of an identifiable part of a hospital facility.

2. The hospital's application to the Secretary shall include reason-
able assurance that all laborers and mechanics employed by contrac-
tors or subcontractors in the performance of work on a project will be
paid wages at rates not less than those prevailing on similar construc-
tion in the locality as determined by the Secretary of Labor in ac-
cordance with the Act of March 3, 1931, and the Secretary of Labor
shall have with respect to such labor standards the authority and func-
tions set forth in Reorganization Plan numbered 14 of 1950 and sec-
tion 2 of the Act of June 13, 1934.

3. In determining the need for any service or services proposed to
be discontinued or converted by an applicant, a health systems agency
and State agency shall give special consideration to the unmet needs
and existing access patterns of urban or rural poverty populations.

The conferees note that there have been numerous suggestions that
the health planning program deal with the problem of excess capacity
by adding a mandatory decertification authority to the existing man-
date for certification of the need for proposed new institutional health
services. The approach envisioned in this bill, however, is purely volun-
tary in nature and depends for its success on the cooperation of both
providers and planning agencies. The conferees also note their con-
cern that the voluntary incentives could create the situation in which
some communities might be tempted to close politically or fi-
nancially vulnerable services such as those provided by a public general
hospital. Similarly, during the past several years private hospitals
located in low income inter-city neighborhoods have either transferred
their facilities to outlying suburban areas or established satellite facili-
ties in suburban areas which then drain needed resources away from
inter-city communities. Such closures or phase outs deny access to
needed services by the poor and minorities and can be particularly
devastating if the clinics or departments involved are the source of
scarce emergency or outpatient services. The conferees intend that the
guidelines and priorities of this program are such that they assure
that the facilities and clinics needed by the poor and minorities for
inpatient and outpatient care are not discontinued unless adequate
provision for alternative facilities and clinics are made available. The
conferees have agreed to permit grants to be used to discontinue the
provision of an identifiable part of a hospital facility so that, for
instance, an entire wing of a hospital may be taken out of service. This
authority is not to be used to discontinue an identifiable service unit,
such as one of four operating rooms.

The conferees recognize that the closing of unneeded facilities and
services will affect many emplovees. In requiring the hospital discon-
tinuing services to make fair and equitable arrangements to protect the
interests of employees, the confer^ei^Te^?^

7500 Security Blvd.
Baltimore, Mar/tend 21244

CMS LIBRARY

100 linn

3 ACH5 DDDD751L

employees against a worsening of their positions respecting employ-
ment. This means that the hospitals should make a reasonable effort
to obtain comparable employment for affected employees and should
substantially preserve the rights achieved by the employees. The Sec-
retary of Labor should describe the issues which hospitals must
address in making fair and equitable arrangements, and is expected
to actively encourage and foster adequate protection for all em-
ployees affected by grants under this section.

Grants to States for reduction of excess hospital capacity

The Senate bill authorizes the Secretary to make grants to
SHPDA's for planning, evaluating or carrying out programs to de-
certify health care facilities (section 205) .

The House amendment contains a provision which authorizes grants
to States for the purpose of demonstrating the effectiveness of various
means of reducing excess hospital capacity. Such grants would assist
SHPDA's in identifying excess capacity, informing the public of its
costs, and developing a program to reduce excess capacity in a way
that provides the greatest savings in the cost of health care delivery.
Four million dollars is authorized for each of the next three years
(section 118(b)).

The conference substitute combines the two approaches in new sec-
tion 1643. Support for SHPDA's under this section would be limited
to 10 percent of the amount appropriated under new section 1644
(section 301).

Harley O. Staggers,
Henry A. Waxman,
David E. Satterfield,
Richardson Preyer,
James T. Broyhill,
Tim Lee Carter,
M onagers on the Part of the Home.
Edward M. Kennedy,
Harrison A. Williams, Jr.,
Gaylord Nelson,
Alan Cranston,
Claiborne Pell,
Richard S. Schweiker,
Jacob K. Javits,
Orrin G. Hatch,
Managers on the Part of the Senate.

o